Higher bank borrowing likely in July

The government is set to start fiscal year (FY) 2021-22 with a higher bank borrowing target for July to adjust expenditure in June and partly finance budget deficit.

It may take up to Tk 206.50 billion in gross borrowing from the banking system in July, the first month of FY22, by issuing treasury bills (T-bills) and bonds.

The government's auction calendar, issued by the central bank on Tuesday, made the disclosures.

Auction calendar is the schedule and the amount of T-bills and bonds issued through auction for raising funds from the market to partly meet budget deficit.

Officials said the government's net bank borrowing may reach Tk 80 billion in the single month of July, after deducting Tk 126.50 billion against the government securities that would mature in the month.

"Government borrowing from the banking system normally increases in July… mainly due to adjusting higher expenditure in the previous month," said a senior Bangladesh Bank official told the FE.

In June, such borrowing rises because of releasing funds for execution of various development projects across the country, he explained.

Talking to the FE, a senior official familiar with the government debt management activities said the bank borrowing target for July was higher considering the entire fiscal target.

The government has set a lower borrowing target from the banking system to meet the budget deficit in FY22.

Its borrowing is set to be Tk 764.52 billion for FY22 from Tk 797.49-billion revised target in the outgoing fiscal year, according to the budget documents.

In FY21, the government slashed its bank borrowing target by more than 6.0 per cent to Tk 797.49 billion, compelled by lower implementation of the annual development programme. The original target was Tk 849.80 billion for FY21.

Under the arrangement, the government will borrow Tk 516 billion through issuing long-term Bangladesh Government Treasury Bonds, generally known as bonds, and the remaining Tk 248.52 billion through T-bills.

"The government's bank borrowing is likely to fall in the months of August and September 2021 if the ongoing Covid-19 pandemic continues," the official predicted.

Currently, three T-bills are being transacted through auctions to adjust government borrowing from the banking system. The T-bills have 91-day, 182-day and 364-day maturity periods.

Furthermore, five government bonds with tenures of 02, 05, 10, 15 and 20 years are traded in the money market.

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