Govt raises emergency borrowing ceiling 50pc

The government has raised the ceiling for its emergency borrowing tools by 50 per cent to manage fiscal deficits amid poor resource mobilisation, according to an official document, as economists warned that this could exacerbate inflationary discomfort.

There are two popular emergency borrowing tools -- ways and means advance (WMA) and overdraft -- that the government relies on when the exchequer depletes fast or falls into a negative balance.

The ceiling is now Tk 120 billion for ways and means advance and Tk 120 billion for overdraft, totalling Tk 240 billion.

The Finance Division recently wrote to the governor of Bangladesh Bank about the matter.

Dr M Masrur Reaz, an economist and chairman of the Policy Exchange of Bangladesh, told The Financial Express that this increase in the government's borrowing limits carries some risks.

He said it could fuel inflationary pressure on the economy, adding, "The government, which is very capable, should focus on how to increase domestic resource mobilisation."

He also said this might indicate resource shortages for government spending, potentially leading to long-term economic instability.

Both WMA and overdraft are temporary advances provided by the central bank to the government to bridge any gap between receipts and payments.

Officials say that when the cash balance goes negative, the government needs to borrow a similar amount from the central bank's ways and means advance and overdraft windows.

Confirming the development, a central bank official said the ministry sent a letter to the central bank regarding the upward revision of the ceiling for the two emergency borrowing windows.

The official added that the Finance Division had been discussing the matter for the past few months and finally wrote to the governor to request a 50 per cent increase in the upper ceiling.

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