The government's borrowing from the country's banking system jumped in the last week of June to partly finance its budget deficit in the just concluded fiscal year (FY), 2015-16, officials said on Thursday.
The government's net bank borrowing stood at Tk 48.07 billion as on June 30, according to the central bank's confidential report. A year ago it was in the negative, amounting to Tk 68.70 billion.
Actual borrowing from the banking system for FY 15 was Tk 5.14 billion, according to the budget document for FY 17.
"The government has borrowed from the banking system significantly to meet higher expenditure for the last month of FY 16," explained a senior official, familiar with the government debt-management activities.
He also said the implementation of development projects normally gets momentum in the last month of each fiscal.
"Faster implementation of development projects along with full execution of the new national pay-scale has forced the government to borrow more from the banking system," the official noted.
Talking to the FE, a senior official of the Bangladesh Bank (BB) said the government has already availed both overdraft (OD) drawing facility and ways and means advances (WMAs) to finance its deficit.
The government is now empowered to borrow up to Tk 40 billion from the central bank under WMAs to meet its day-to-day expenditures without issuing any securities.
Besides, the government's limit for OD drawing from BB has been fixed at Tk 40 billion.
It borrowed Tk 88.03 billion from the central bank using WMAs and OD as on June 30, 2016, while Tk 39.95 billion was paid to the scheduled banks against its total liabilities, according to the BB report.
"The government's net borrowing from the domestic sources - both from banking system and savings instruments - would remain close to the respective targets set for FY 17," Dr Ahsan H Mansur, executive director of Policy Research Institute (PRI) of Bangladesh, told the FE.
But the government's borrowing through savings instruments will rise, while the bank borrowing target will not be achieved by the end of the current fiscal year, he observed.
The government has set the bank borrowing target at Tk 389.38 billion for FY 17 to finance its budget deficit.
Under the proposed arrangement, Tk 289.10 billion will be borrowed from the country's banking system by issuing long-term Bangladesh Government Treasury Bonds (BGTBs), while the remaining Tk 100.28 billion through auctions of short-term treasury bills (T-bills).
The Ministry of Finance earlier revised downward the net bank borrowing target to Tk 316.75 billion from the original target of Tk 385.23 for FY 16, mainly due to slower implementation of the annual development programme (ADP).
In FY 15, the government's net borrowing target was revised to Tk 326.5 billion from the banking system from the original target of Tk 312.2 billion.
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