Bangladesh
6 years ago

Govt suspends auctions of T-bills, bonds for February amid liquidity glut

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The government has suspended auctions of both treasury bills (T-bills) and bonds for the month of February to ensure proper cash management, officials said.

Bangladesh Bank (BB) has already communicated the government's decision on suspension of the auctions with the commercial banks.

"We've conveyed the decision to the banks in line with the advice of finance ministry," a senior official at the BB told the FE on Sunday.

The latest move came against the backdrop of holding adequate liquidity by the government at present, he explained.

Currently, the government is holding around Tk 40 billion in excess liquidity in its accounts.

Almost the same level implementation of projects under Annual Development Programme (ADP) and higher sales of savings instruments tipped the excess liquidity balance and helped the government lessen its borrowing from the banking system, another BB official explained.

The government ministries and agencies spent Tk 443.31 billion or 27.02 per cent of the total development budget of Tk 1.64 trillion during the July-December period of the current fiscal year (FY 2017-18), according to official figures.

The implementation rate during the first half (H1) of the FY 2016-17 was also 27.20 per cent with an expenditure of Tk 335.54 billion.

The government has undertaken a Tk 1.64 trillion ADP for this FY to implement more than 1,300 development projects.

The BB official said the government's net bank borrowing was still at a negative level, amounting to Tk 128.59 billion as on January 28, mainly due to higher sales of the savings certificates.

The net sales of savings instruments rose by 1.49 per cent or Tk 3.50 billion to Tk 238.23 billion in the H1 of FY 2017-18 from Tk 234.73 billion in the same period of the previous FY.

In July-December period of the current FY, the government's net borrowing through savings instruments was more than 79 per cent of the entire fiscal year's target of Tk 301.50 billion.

Senior bankers, however, did not see any major impact on such auction suspension, saying that it might help keep the market stable.

"The demand for the BB bills may rise in the month of February to meet the SLR (statutory liquidity ratio)," said a senior treasury official of a leading private commercial bank (PCB).

The banks are allowed to maintain the SLR in the form of assets in cash or gold or in the form of un-encumbered approved securities, the market value of which shall not be less than 13 per cent fixed by the BB.

The government is set to inject Tk 11.50 billion in the market for making payments against maturity of its bonds in February from its excess funds, the BB official added.

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.

Furthermore, five government bonds, with tenures of two, five, 10, 15 and 20 years respectively, are traded on the market.

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