Govt cuts borrowing target from banks by almost half

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FE Report
The government has slashed its borrowing target from the banking system by almost half for this fiscal following a significant increase in debt on account of selling national savings directorate (NSD) certificates.
The finance ministry has revised the government's bank borrowing target for fiscal 2009-10 (FY10) down to Tk 86.61 billion from the original Tk 167.55 billion, according to the budget implementation progress report placed by Finance Minister Abul Maal Abdul Muhith in parliament Tuesday.
The government borrowing from banking sector has already dropped compared to the original target because of higher borrowing from NSD certificates, the finance minister said in parliament while placing the report.
The government's net bank borrowing dropped by 21.91 per cent to Tk 61.46 billion during July-December period of this fiscal against the target of Tk 78.71 billion, according to the central bank statistics.
On the other hand, net borrowing of the government through NSD certificates recorded a significant rise by 300per cent to Tk 50.34 billion in the first half of this fiscal. The figure was Tk 12.19 billion in the same period of the previous fiscal.
The government had set a net borrowing target of Tk 23.77 billion by issuing NSD certificates to fund the budget deficit for the current fiscal, according to the budget documents.
Lower rate of implementation of the annual development programme (ADP) and surplus balance in government account have also contributed to reduced borrowing from the country' banking system, the Bangladesh Bank (BB) officials said.
Recent data show that the implementation of ADP during the first half of FY10 remained under 30 per cent of the annual target amounting to Tk 305 billion indicating another challenge for the economic progress at the current rate of ADP execution, they added.
In the revised budget, it is expected that education, agriculture, defence, water resources, home, energy and mineral resources and environment ministries would get more allocation while finance division, power division, bridge division, planning division, shipping ministry and civil aviation and tourism ministry would get less allocation, the finance minister added.
"The surplus balance in government account now stands over Tk 90 billion," a BB senior official told the FE Saturday, adding that issuance of the government treasury bills and bonds would fall significantly in the fourth quarter compared to the previous quarters of the current fiscal due to the surplus balance.
Currently, three T-bills are being transacted through auctions to adjust the government borrowing from the banking system.
The T-bills have 91-day, 182-day and 364-day maturity periods.
On the other hand, four government bonds - 5-year, 10-year, 15-year and 20-year -are being traded in the markets.
Market players, however, said the fund flow in the banking system may increase and that would make more credit available for private sector during the period
"The commercial bank will have more fund to invest in the private sector as the government borrowing from banking system may decline in the last quarter," Managing Director and Chief Executive Officer of the Agrani Bank Limited Syed Abu Naser Bukhtear Ahmed told the FE.