Govt borrows Tk 117.94bn thru T-bills in single day

The government on Sunday borrowed Tk 117.94 billion in a single day by issuing three types of treasury bills to partly finance its budget deficit.

The amount borrowed is well above the pre-auction target of Tk 80 billion, according to the auction results.

"The government borrowed a substantial amount in today's auction -- the final one of the outgoing fiscal year -- to meet its budget deficit," the treasury head of a leading private commercial bank told The Financial Express (FE) while explaining the rise in bank borrowing.

On the other hand, yields on T-bills showed a mixed trend on the day, as most banks opted to invest their excess liquidity in the risk-free securities, particularly those with longer tenures.

The cut-off yield, commonly referred to as the interest rate, on 182-day T-bills came down to 12.00 per cent from 12.11 per cent while the yield on 364-day T-bills fell to 12.03 per cent from 12.18 per cent. However, the yield on 91-day T-bills remained unchanged at 12.09 per cent.

The current trend in T-bill yields may continue in the coming days, the private banker predicated.

A senior official of the Bangladesh Bank (BB) told the FE that the government's demand for funds has increased significantly ahead of the end of the outgoing fiscal year to meet its budgetary expenditures. He explained that the government's bank borrowing normally increases in June, the final month of each fiscal year, as part of efforts to cover the budget deficit.

The official further noted that the government's borrowing from the central bank through ways-and-means advances (WMAs) and overdraft (OD) facilities has exceeded the targeted levels.

Currently, the government is empowered to borrow up to Tk 120 billion from the BB under the WMAs to meet its day-to-day spending without issuing any securities. In addition, it is entitled to borrow a maximum of Tk 120 billion through OD facility from the central bank for the same purpose.

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