Government borrowings from internal and external sources increased by nearly 26 per cent to Tk 205.26 billion, as on November 22, for financing overall budget deficit, officials said.
Net borrowing from the domestic sources like banking system and national savings schemes increased to Tk 174.80 billion until November 22 of the ongoing financial year (FY) from Tk 143.57 billion in the corresponding period of last fiscal.
And net borrowing from overseas sources in loans and grants was Tk 30.46 billion, up from Tk 19.63 billion during the period under review, according to a finance ministry report.
The government, however, borrowed less from the country's banking system, as its bank borrowings dropped nearly 71 per cent. Mainly higher sales of national savings certificates tipped the balance.
Its net borrowing from non-bank sources, particularly from national savings certificates, jumped by over 76 per cent during the period.
Net bank borrowings by the government dropped to Tk 15.64 billion, as on November 22 of the FY 2017-16, from Tk 53.25 billion in the same period of the FY16.
"The government's net bank borrowing entered into negative territory in the first week of December 2016 but saw a reverse trend after the second week of the month," a senior official familiar with the government debt-management activities told the FE.
The official also said the government borrowing from the banking system had maintained an up-and-down trend in recent months mainly due to hefty growth in sales of the national savings instruments.
"Lower implementation of Annual Development Programme (ADP) projects during the first quarter of the FY 17 and higher sales of savings instruments have helped the government lessen borrowing from the banking system," the official explained.
Surplus balance also prompted the government to scale down borrowing from the banking system, according to the official.
Currently, the government holds around Tk 20 billion in surplus liquidity in its accounts.
However, official figures show that net sales of national savings instruments shot up by Tk 68.83 billion to Tk 159.17 billion during the July-October period of this FY from Tk 90.34 billion in the same period of the FY 16.
For the entire FY17, government's original target of net borrowing from national savings schemes was Tk 196.10 billion for part- financing of its budget shortfalls.
People are more interested to invest in the savings instruments for a lack of alternatives, the ministry explained in its report, as interests offered by banks on deposits drastically fell.
Particularly, it said, interest rates on term deposits have decreased significantly that contributed to rise in investment in the national savings schemes.
However, the weighted average rates on deposits came down to 5.33 per cent in October last from 6.21 per cent in January 2016, according to the central bank latest statistics.
Government's overall borrowing from various sources was discussed at the last meeting of Cash and Debt Management Technical Committee (CDMTC) at the Finance Ministry on November 29, according to the official.
Talking to the FE, M A Halim Chowdhury, Managing Director and Chief Executive Officer (CEO) of Pubali Bank Limited, said savers, practically small ones, are getting encouraged to invest in the instruments mainly due to higher yields on the savings certificates.
Currently, average interest rate on deposits, offered by the commercial banks, is over 5.00 per cent, while the rate for savings instruments is paid on average 11 per cent, the senior banker explained.
Syed Mahbubur Rahman, managing director and CEO of Dhaka Bank Limited, said debt-servicing burden of the government would go up significantly by the end of this fiscal if the abnormal trend in sale of savings certificates continued.
"It's not reflecting the market so the government should look into the matter," the banker noted.
Meanwhile, the net government borrowings from offshore sources swelled more than 55 per cent to Tk 30.04 billion in the first four months of the current fiscal from Tk 19.63 billion in the same period of the FY 16.
The inflow of grants, however, dropped by more than 19 per cent to Tk 9.24 billion from Tk 11.42 billion a year ago, according to the report on the state of public finance.
The government has already set a target to borrow Tk 923.37 billion from both domestic and overseas sources for financing the resource gap in its Tk 3.41 trillion budget.
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