The government is set to borrow a net Tk 55 billion from the country's banking system for the month of November to partly meet its budget deficit, officials said.
The government may take up to Tk 144 billion as gross borrowing from the banking system in November by issuing treasury bills (T-bills) and bonds, according to the government's auction calendar, issued by the Bangladesh Bank (BB) on Thursday.
The auction calendar means the schedule and the amount of T-bills and bonds to be issued through auction for raising funds from the market to meet the government budget deficit partly.
The government's net bank borrowing may reach Tk 55 billion in the single month, after deducting Tk 89 billion against the government securities that would mature during the month, according to the officials.
"The government faced deficit balance in its account significantly by the end of October because the inflow of fund was lower than that of outflow," a senior official familiar with the government debt-management activities told the FE.
The government's account deficit stood at Tk 40 billion as on October 29 that was fulfilled with using ways and means advances (WMAs) facility from the central bank, according to the official.
Under the existing rules, the government is empowered to borrow up to a maximum amount of Tk 60 billion from the central bank of Bangladesh under WMAs facility without issuing any securities.
The official expressed the hope that bank borrowing of the government may ease slightly in December as higher revenue collection is expected by the end of this month.
Meanwhile, the government's aggregate net bank borrowing stood at Tk 276.34 billion, which was more than 58 per cent of the total target, as of October 21 of FY 2019-2020, according to a BB's confidential report.
Of the total, the government borrowed Tk 256.88 billion from the scheduled banks using T-bills and bonds, and the remainder Tk 19.46 billion from the central bank.
A falling trend in sales of national savings certificates along with a shortfall in revenue collection has led to higher bank borrowing by the government during the period under review.
Talking to the FE, another senior official said the government's bank borrowing may exceed the target by the end of this fiscal if the decreasing trend in sales of the national savings instruments continued.
The government had already targeted higher borrowing from the banking system to finance the budget deficit partly for the FY '20.
Its bank borrowing is set to be Tk 473.64 billion for the FY '20, up from Tk 308.95 billion in the previous year, according to the budget documents.
Under the arrangement, the government will borrow Tk 280.94 billion by issuing long-term bonds while the remaining Tk 192.70 billion will come from T-bills.
Currently, four T-bills are being transacted through auctions to adjust the government's borrowings from the banking system. The T-bills have 14-day, 91-day, 182-day and 364-day maturity periods.
Also, five government bonds with tenures of two-year, five-year, 10-year, 15-year and 20-year are traded on the market.
Market operators, however, did not see immediate impact on the government's higher bank borrowing on the market as liquidity memains manageable.
"The government's higher borrowing from the banking system may put pressure on the market in 2020 while banks will try to grow their lending activities," Syed Mahbubur Rahman, chairman of the Association of Bankers, Bangladesh (ABB), told the FE on Friday.
Talking to the FE, a senior executive of a leading private commercial bank said the liquidity pressure on the market may rise in the near future if the government's bank borrowing continues.
Besides, selling of the US dollar by the central bank continuously to the commercial banks to help setting import payment obligations may push up liquidity pressure on the market in the coming months, he added.
The central bank has provided foreign currency support continuously through selling the greenback to the banks directly to keep the foreign exchange market stable.
As part of the move, the central bank sold US$12 million more to two state-owned commercial banks (SoCBs) on Thursday to settle their import payment obligations.
The BB so far sold $159 million to the banks, particularly public ones, during the current fiscal year (FY) 2019-20 to meet the growing demand for the greenback in the market.