Govt borrowing from banks falls 32pc in first half of FY ’14

The government's borrowing from the banking system dropped by more than 32 per cent in the first half of the current fiscal year (FY) 2013-14 due mainly to lower implementation of the Annual Development Programme (ADP) caused by the ongoing political turmoil.
The government's net bank borrowing came down to Tk 45.70 billion during July-December period of the FY `14 from Tk 67.26 billion in the corresponding period of the last fiscal, according to the central bank statistics.
"The government's net bank borrowing has decreased significantly during the period under review because of hindrances to the overall development activities across the country amid political uncertainty in the recent months," a senior official close to the government's debt management activities told the FE Thursday.
All the government ministries and divisions spent Tk 131.56 billion, 20 per cent of the Tk 658.72 billion ADP allocation, in July-November period of the FY `14.
On the other hand, the government ministries and divisions have spent 25 per cent of the total Tk 550 billion allocations in the ADP in the same period during the FY `13.
The government allocated Tk 658.72 billion in the ADP aimed at boosting public investment and achieving 7.2 per cent gross domestic product (GDP) growth target by the end of the ongoing FY `14.
"Release of limited funds by the poll-time government has also contributed to decrease in such borrowings," the official explained.
He also said the poll-time government has released funds only for essential purposes.
"We expect the government's net bank borrowing to increase in the third quarter of the current fiscal year if political stability is ensured," the official noted.
The government borrowed Tk 112.68 billion from all scheduled banks through issuing treasury bills (T-bills) and bonds as on December 30 last year, while Tk 66.99 billion was paid to the central bank against its total liabilities.
During FY 2014, the government is set to borrow a total of Tk 259.93 billion from the banking system through issuing T-bills and bonds to partly meet its budget deficit.
Under the arrangement, the government has decided to borrow Tk 143.55 billion from the banking system by issuing bonds, while Tk 116.38 billion will be borrowed through auction of short term T-bills.
Currently, three T-bills are being transacted through auctions to adjust the government's borrowing from the banking system. The T-bills have 91-day, 182-day and 364-day maturity periods.
On the other hand, five government bonds with duration of two, five, ten, fifteen and twenty years respectively --- are being traded in the market.
"The government's bank borrowing may not increase significantly by the end of this fiscal year, if the political unrest continues," a senior official at a leading private commercial bank told the FE.
He also said the government was facing difficulties in implementing different infrastructural projects, including the Padma Bridge, amid the ongoing political uncertainty.
The country's overall development activities have been under tremendous pressure since October last year, following frequent spells of blockade and shutdown enforced by the opposition parties.