Government borrowings from the banking system soared nearly 166 per cent in the first quarter (Q1) of this fiscal year (FY) mainly for settling its liabilities with the central bank, officials said.
Its net borrowings from the banking system shot up to Tk 87.57 billion during the July-September period of the FY 2015-16 from Tk 32.94 billion in the same period a year ago, according to a central bank's confidential report.
"Most of the borrowed funds have already been used for settling the government's debt to the Bangladesh Bank (BB) under ways and means and overdraft facilities," a senior official close to the public debt management-related activities told the FE Monday.
During the period under review, the government borrowed Tk 119.91 billion, in gross term, from the commercial banks through different bonds and treasury bills (T-bills) while repaid Tk 32.34 billion to the central bank.
"Around Tk 120 billion has already been repaid to the BB to clear the outstanding dues under ways and means and overdraft accounts," the official explained.
Currently, there are no outstanding balances under two accounts.
He also said the government borrowed a substantial amount from the central bank using ways and means and overdraft facilities to meet its budgetary expenditure from July to August.
The government is now empowered to borrow a maximum of Tk 40 billion from the central bank under the ways and means advances (WMAs) to meet its day-to-day expenditures without issuing any securities.
Besides, government's limit for overdraft (OD) drawing from the state bank was fixed at Tk 40 billion. But the limit was suspended for July to foot the bill for higher budgetary expenses during the period.
"We'll review the latest trend of our overall borrowing from the banking system in the next cash-and-debt-management committee (CDMC) meeting, scheduled to be held in the ministry of finance on October 29," the official said.
The CDMC may finalise debt strategy for the second quarter (Q2) of the FY16 considering its Q1 borrowing pattern," he hinted.
Talking to the FE, another official said the government bank borrowings increased significantly during the period under review despite lower implementation of the annual development programme (ADP).
Different ministries and divisions have been able to implement only 3.0 per cent of the total ADP allocation during the first two months of the current fiscal--the lowest in three years.
On the other hand, foreign aid disbursement dropped by 20 per cent to nearly US$293 million during this past July-August period over the same period of the FY15 for lower implementation of the ADP.
"The government borrowing from the banking system may rise in the coming months following implementation of different mega development projects, particularly the infrastructural ones, which are gearing up gradually," the official explained.
The official also said the declining trend in national savings certificates' sale has also forced the government to borrow more from the banking system.
The borrowing through the national savings instruments came down to Tk 19.76 billion in July from Tk 21.70 billion a month ago, due to recent cuts in their yield rates. It was Tk 18.58 billion in July 2014.
The government is set to borrow Tk 385.23 billion from the country's banking system through issuing both short- and long-term securities during FY16.
Under the proposed arrangement, Tk 241.82 billion will be borrowed from the country's banking system through issuing long-term Bangladesh Government Treasury Bonds (BGTBs), while the remaining Tk 143.41 billion through auction of short-term treasury bills (T-bills).
Currently, three T-bills are being transacted through auction to adjust the government borrowings from the banking system. The T-bills have 91-day, 182-day and 364-day maturity periods.
Furthermore, five government bonds, with duration of two, five, 10, 15 and 20 years respectively, are being traded on the money market.
In FY15, the government did not borrow from the banking system. Rather it repaid a portion of debts due to a rise in sales of savings instruments and slow implementation of development projects.
The government repaid Tk 68.70 billion more than fresh borrowing from the banking system in FY15. The borrowing was Tk 64.28 billion in the previous fiscal.
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