June net amount balloons as ADP execution revs up

The government's net borrowing from the banking system marked an abrupt jump in the last week of June, driven by demand from development projects.

Such borrowing was at a negative level, amounting to Tk 66.63 billion as on June 21 but it turned positive a week later, according to the central bank's confidential reports.

The government borrowed Tk 13.96 billion from the banking system on a single day on June 30 to partly finance its budget deficit.

It was the last working day of the just-concluded fiscal year (FY).

In June alone, the government's net borrowing stood at Tk 137.90 billion following faster implementation of development projects, officials familiar with the government debt-management told the FE.

The implementation of the development projects normally picks up speed in the last month of each fiscal year, they said.

Net borrowing from the banking system increased slightly by 1.03 per cent or Tk 9.25 billion to meet its budgetary expenses.

The aggregate amount of borrowing from the banking system rose to Tk 906.42 billion until June 30 from Tk 897.16 billion a year ago, the Bangladesh Bank (BB) data showed.

Initially, the government's bank borrowing target was set at Tk 282.03 billion for FY 2017-18, but was later revised lower to Tk 199.17 billion.

In FY 17, such borrowing was negative amounting to Tk 83.79 billion, according to the budget documents.

Talking to the FE, a BB senior official said the government has already worked out ways, means and advances (WMAs) to finance the budget deficit, in part.

The government is now empowered to borrow up to Tk 40 billion from the central bank to meet its day-to-day expenditures without issuing any securities.

"Such upward trend in the government bank borrowing may continue in the month of June," the central banker predicted.

Currently, the government is holding negative balance amounting to around Tk 30 billion in its accounts, he said.

Higher sales of savings instruments helped the government refrain from borrowing much from the banks in the FY'18, according to officials.

The government had sold savings certificates amounting to Tk 433.64 billion during the July-May period of the FY 18 while the original target set for the full fiscal was Tk 301.50 billion.

Later on, the government's revised the target at Tk 440 billion for the FY 18.

They also said lower implementation of development projects has also contributed to decrease bank borrowing of the government in the FY 18.

In the FY 18, the implementation rate of the Annual Development Programme (ADP) surged 93 per cent against 87 per cent in the previous fiscal.

The ministry of finance had set a bank-borrowing target of Tk 420.29 billion for the FY19 to finance the budget deficit.

Under the proposed bank borrowing, the government will borrow Tk 239.65 billion issuing long-term bonds while the remaining Tk 180.64 billion through treasury bills (T-bills).

Currently, four treasury bills (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, five, 10, 15 and 20 years respectively, are traded on the market.

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