The government's borrowing from the banking system soared nearly 88 per cent year-on-year in the first nine days of the current fiscal year (FY), 2015-16, partly to finance its budget deficit, officials said.
Its net borrowing from the banking system shot up to Tk 94.73 billion on July 1-9 of this FY, against Tk 50.41 billion in the same period a year ago, according to the central bank's latest statistics.
Most of the fund was borrowed from the Bangladesh Bank (BB) using ways and means and overdraft facilities, a senior official close to the public debt management-related activities told the FE on Tuesday.
The government borrowed Tk 87.96 billion, out of Tk 94.73 billion, from the central bank during the period under review, according to the official.
"The government's bank borrowing may increase further in the coming days to meet its overall cash shortfall, which stood at Tk 110.29 billion as on July 20." The official also said budgetary expenditure of the government increased sharply, following implementation of different development projects, particularly those of road repair, ahead of the Eid-ul-Fitr festival.
"Declining trend in national savings certificates sales has also forced the government to borrow more from the banking system," he explained.
The government's borrowing from the national savings instruments dropped by nearly 18 per cent to Tk 24.34 billion in May, from Tk 29.57 billion a month ago, due to cut in the yield rates recently.
The government is now empowered to borrow up to 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, the government's limit for overdraft (OD) drawing from BB was fixed at Tk 40 billion. But the limit has been suspended for July, indicating more borrowing from the central bank, another official hinted.
The official also said the government's budgetary expenditure may rise in FY 16, as implementation of different development projects, particularly the infrastructural ones, will gear up.
The government is now implementing different mega infrastructure projects, including Padma Multipurpose Bridge, Deep-Seaport at Sonadia in Cox's Bazar, Dhaka-Chittagong Access Control Highway, and Dhaka City Elevated Expressway, that will help boost economic growth, he explained.
Talking to the FE, a BB senior official said private sector credit flow will not be affected by the government's bank borrowing, as there is enough liquidity supply in the banking system. The overall excess liquidity with the commercial banks stood at around Tk 1.05 trillion as of May 28. Major portion of the funds has been invested in the risk-free government securities.
He also said excess reserve, generally known as excess over daily minimum cash reserve requirement (CRR), with the central bank stood at around Tk 32 billion.
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 FY 16.
Under the proposed arrangement, Tk 241.82 billion will be borrowed from the country's banking system by 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's borrowing 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 in the market.
In FY 15, 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 FY 15. The borrowing was Tk 64.28 billion in the previous fiscal.
Initially, the bank borrowing target was set at Tk 312.21 billion for FY 15. But the amount was later revised to Tk 317.14 billion, according to the budget document.
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