The government is likely to set its borrowing target from the banking system at over Tk 760 billion to finance the budget deficit in the next fiscal year (FY), officials said.
The bank borrowing for the FY2021-22 would be 7.0-plus per cent less than the revised target of Tk 820 billion for the outgoing FY2020-21.
"Actually, the government is expecting more financial support in FY'22 from the development partners," a senior official familiar with the government debt management activities told the FE on Wednesday.
He said the development partners like the World Bank and Asian Development Bank (ADB) would provide more resources to help expedite recovery of the pandemic-hit economy.
He said the ministry of fiancé would mobilise around 65 per cent of the borrowing target through issuing long-term Bangladesh Government Treasury Bonds (BGTBs), generally known as bonds, while the rest 35 per cent by issuing treasury bills (T-bills).
Talking to the FE, a senior official of the Bangladesh Bank (BB) said the government borrowed around Tk 300 billion through issuing T-bills and bonds from the country's scheduled banks during the July-May period of FY '21 against its revised annual target of Tk 820 billion.
In February 2021, the government slashed its bank borrowing target by more than 3.0 per cent to Tk 820 billion for FY'21, compelled by lower execution of the annual development programme (ADP) due to the ongoing Covid-19 pandemic.
Besides, the government is set to borrow a net amount of over Tk 80 billion from the country's banking system this month (June) to meet its budget deficit, according to the BB official.
The government may take up to Tk 195.50 billion as gross borrowing from the banking system in June, the last month of this fiscal year, by issuing T-bills and bonds, according to the government's auction calendar, issued by the central bank recently.
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 partly meet the budget deficit.
The government's net bank borrowing may reach Tk 80.09 billion in the single month of June, after deducting Tk 11.54 billion against the government securities that would mature in the month, the central banker explained.
Such borrowing normally increases in the last two months - May and June - of each fiscal year because of releasing funds against execution of the various development projects across the country.
"But higher sales of national savings certificates (NSCs) have pushed down the borrowing from the banking system this FY," another BB official said.
Meanwhile, the net sales of NSCs almost tripled in the first nine months of FY'21 mainly due to lower deposit rates offered by the commercial banks.
The government's net borrowing through selling savings tools jumped by 196.38 per cent to Tk 332.03 billion during the July-March period of FY'21 from Tk 112.03 billion in the same period of the previous fiscal year, according to official data.
Emphasising on higher returns, the savers, particularly small ones, now prefer investing their hard-earned money in the NSCs instead of depositing the same with the banks.
The government's savings schemes pay more than 11 per cent profits annually, while the weighted average interest rate on bank deposits came down to below 5.0 per cent in the recent months, according to the bankers.
The weighted average interest rate on deposits fell to 4.36 per cent in April 2021 from 4.40 per cent a month earlier, the BB data showed.
Earlier, the government had set a higher borrowing target from the banking system to partly finance the budget deficit in FY'21.
Its original target was Tk 849.80 billion in FY'21, up from Tk 473.64 billion a year ago, according to the budget documents.
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.