The government borrowed Tk 289.52 billion from banks in July-August for deficit financing but its net borrowing came to over Tk107 billion in the first two months of this fiscal after repayment.
Officials said the government borrowing in the two months of the fiscal year (FY) 2024-25 was partly necessitated to meet budget deficit incurred under the deposed regime.
Actually, the ministry of finance borrowed Tk 289.52 billion from all the scheduled banks through issuing treasury bills and bonds during the period under review on the grounds while Tk 182.49 billion was paid to the central bank.
This balance of bank debts comes clear from to a confidential report on the government borrowing from the banking system, prepared by the Bangladesh Bank (BB).
The government has borrowed mainly from the commercial banks to avert injecting fresh funds by the central bank into the market by printing money, a senior official familiar with the government debt-management activities told the FE Thursday.
"It will help in curbing inflationary pressure on the economy," the official explains merit of the switch.
On the other hand, the government has availed Tk 40 billion under ways-and-means advances (WMAs) facility to finance the budget deficit.
The government is now empowered to borrow up to Tk 120 billion from the central bank under the WMAs to meet its day-to-day expenditures without issuing any securities.
In addition, it is entitled to borrow a maximum of Tk 120 billion through overdraft (OD) drawing facility from the central bank for the same purpose.
"The government had availed the OD facility earlier but now it is being cleared," another official said, adding that such measures indicate that government expenditure is getting reduced amid a slower pace of implementation of development projects.
Government bank-borrowing target may be revised downward in the near future, the official hints.
Meanwhile, the higher government borrowing from the commercial banks may slow the flow of credits to the private sector, which is considered a key catalyst for the gross domestic product (GDP) growth of Bangladesh. "We're now preferring to invest our excess funds in government securities because of better returns and safety," a senior executive of a leading private commercial bank told the FE in reply to a query.
He also said lower demand for credits, particularly from the private sector, also pushed up investment in the risk-free government securities.
The net government bank borrowing is set to be Tk 1375.00 billion for the FY'25 in a rise from Tk 1323.95 billion in the previous year, according to the budget documents.
However, the government revised its bank-borrowing target to Tk 1559.35 billion from the proposed Tk 1323.95 billion for the past FY '24. But the net government borrowing from banks was Tk 942.82 billion by the end of FY '24.
Under the arrangement, the government will borrow Tk726.82 billion issuing long-term bonds while the remaining Tk 648.18 billion through treasury bills (T-bills).
Currently, four treasury bills (T-bills) are being transacted through auctions to adjust the government 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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