The government borrowed nearly Tk 230 billion from the country’s banking system in the first 35 days of the current fiscal year (FY), 2019-20, to finance its budget deficit partly, officials said.
“The government’s bank borrowing has already increased significantly to adjust higher expenditure for the last month of FY 2018-19 (June),” a senior official told the FE on Wednesday.
Normally adjustment of the previous fiscal’s expenditure is allowed in the first-half of July of the next fiscal, added the official, familiar with the government’s debt management process.
During the period under review (the first 35 days), the government borrowed from both sources – the scheduled banks and the Bangladesh Bank (BB), as its account went to negative territory.
The government’s account saw a negative balance, amounting to Tk 33 billion as of August 19, according to another official.
Besides, a decreasing trend in sales of the national savings certificates (NSCs) in the recent months has also contributed to push up the government’s bank borrowing volume, he explained.
Net sales of the NSCs came down to Tk 32.08 billion in June from Tk 32.58 billion in the previous month, according to official figures.
The officials also said major portion of the borrowed money came from short-term treasury bills (T-bills), so that there will be no impact on the government’s net borrowing by the end of FY 20.
The impact of higher bank borrowing, however, is yet to visible in the market, as the BB is providing liquidity support to the banks by using its monetary instruments, like - repurchase agreement (repo) and assured liquidity support (ALS).
“Extra pressure will be created in the market, if the central bank reduces providing liquidity support to the banks,” a senior treasury official of a leading private commercial bank (PCB) told the FE.
Talking to the FE, a senior official of the BB said the government has availed Tk 33 billion under ways and means advances (WMAs) facility to finance its budget deficit.
The government is now empowered to borrow up to Tk 40 billion from the central bank under WMAs to meet its day-to-day expenditures without issuing any securities.
In addition, the government is entitled to borrow a maximum of Tk 40 billion through overdraft (OD) drawing facility from the BB on the same ground.
“The government earlier availed the OD facility, but now it has been cleared,” the central banker added.
He also predicted that the existing borrowing trend might continue in the coming months.
The government has already targeted higher borrowing from the banking system to finance its budget deficit partly for FY 20.
The bank borrowing is set to rise to Tk 473.64 billion in this fiscal from Tk 308.95 billion in the previous fiscal, according to the budget documents.
Under the arrangement, the government will borrow Tk 280.94 billion by issuing long-term bonds, and the remaining Tk 192.70 billion through T-bills.
Currently, four T-bills are being transacted through auctions to adjust the government’s borrowing from the banking system. The T-bills have 14-day, 91-day, 182-day and 364-day maturity periods.
Furthermore, five government bonds - with tenures of two, five, 10, 15 and 20 years respectively - are traded in the market.
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