Govt. borrowing from banks overshoots target in FY '09
Sunday, 26 July 2009
Siddique Islam
The government borrowing from the banking system exceeded marginally the revised target set for the fiscal ended on June 30 last.
However, the borrowing in the fiscal was well below the original target.
The government, according to a senior central bank official, borrowed Tk 109.64 billion from banking system in the last fiscal through treasury bills (T-bills) and bonds against the revised target of Tk 106.98 billion to meet its budgetary expenditures.
The official said the government borrowing went up against the revised target mainly due to increase in the current expenditure vis-à-vis the shortfall in revenue collection by the National Board of Revenue (NBR).
In May last, the government slashed its borrowing target, for the first time, from banking system by around Tk 30 billion due mainly to the less-than-expected implementation of the Annual Development Programme (ADP) for the fiscal 2008-09.
The government had revised the borrowing target at around Tk 106.98 billion from the original target of Tk 135 billion.
The government has set a net borrowing target of Tk 78.71 billion from the country's banking system to finance the budget deficit for the first half of fiscal FY10.
During FY10, the government will borrow a total of Tk 167.55 billion from the commercial banks and financial institutions through T-bills and bonds.
"The projected Tk 167.6 billion domestic bank borrowing in FY10 budget is somewhat larger than the original one for the last fiscal, but there should not be any reason to be concerned about the private sector borrowing needs being crowded out, given the current liquidity overhang in the market," the central bank said in its latest monetary policy, released July 19 last.
Indeed, in a situation like the present sluggish private sector investment activities, expanded public sector borrowing for development activities is actually helpful since it ensures the liquidity overhang to good use in pacing up growth momentum, the monetary policy added.
"Even in years of tighter monetary conditions in the past, government's bank borrowing projected in the annual budgets never crowded out private sector borrowing needs, because every year the initial budgetary public expenditure programmes underwent subsequent downsizing, requiring lower bank borrowing than the initial projections," the BB noted.
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.
A total of Tk 524.76 billion was collected by the NBR in FY09 against the revised target of Tk 530 billion. The shortfall was Tk 5.24 billion.
"We've tried to achieve the revised revenue collection target in FY09. But falling trend in the prices of major commodities in the global market has lowered collection of import duties," an NBR senior official told the FE.
During the July-April period of FY09, the import grew by 8.86 per cent, whereas the growth was 24.68 per cent in the corresponding period of the previous fiscal, according to the central bank statistics.
Import of most essential commodities fell, both in terms of value and quantity, in FY09 because of the declining trend in prices in the global market and record food production in the country, the BB officials said.
The import of some essential items including rice, milk food, edible oils and pulses declined in terms of value with the falling trend in the prices of the commodities in the international market, they added.
The government borrowing from the banking system exceeded marginally the revised target set for the fiscal ended on June 30 last.
However, the borrowing in the fiscal was well below the original target.
The government, according to a senior central bank official, borrowed Tk 109.64 billion from banking system in the last fiscal through treasury bills (T-bills) and bonds against the revised target of Tk 106.98 billion to meet its budgetary expenditures.
The official said the government borrowing went up against the revised target mainly due to increase in the current expenditure vis-à-vis the shortfall in revenue collection by the National Board of Revenue (NBR).
In May last, the government slashed its borrowing target, for the first time, from banking system by around Tk 30 billion due mainly to the less-than-expected implementation of the Annual Development Programme (ADP) for the fiscal 2008-09.
The government had revised the borrowing target at around Tk 106.98 billion from the original target of Tk 135 billion.
The government has set a net borrowing target of Tk 78.71 billion from the country's banking system to finance the budget deficit for the first half of fiscal FY10.
During FY10, the government will borrow a total of Tk 167.55 billion from the commercial banks and financial institutions through T-bills and bonds.
"The projected Tk 167.6 billion domestic bank borrowing in FY10 budget is somewhat larger than the original one for the last fiscal, but there should not be any reason to be concerned about the private sector borrowing needs being crowded out, given the current liquidity overhang in the market," the central bank said in its latest monetary policy, released July 19 last.
Indeed, in a situation like the present sluggish private sector investment activities, expanded public sector borrowing for development activities is actually helpful since it ensures the liquidity overhang to good use in pacing up growth momentum, the monetary policy added.
"Even in years of tighter monetary conditions in the past, government's bank borrowing projected in the annual budgets never crowded out private sector borrowing needs, because every year the initial budgetary public expenditure programmes underwent subsequent downsizing, requiring lower bank borrowing than the initial projections," the BB noted.
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.
A total of Tk 524.76 billion was collected by the NBR in FY09 against the revised target of Tk 530 billion. The shortfall was Tk 5.24 billion.
"We've tried to achieve the revised revenue collection target in FY09. But falling trend in the prices of major commodities in the global market has lowered collection of import duties," an NBR senior official told the FE.
During the July-April period of FY09, the import grew by 8.86 per cent, whereas the growth was 24.68 per cent in the corresponding period of the previous fiscal, according to the central bank statistics.
Import of most essential commodities fell, both in terms of value and quantity, in FY09 because of the declining trend in prices in the global market and record food production in the country, the BB officials said.
The import of some essential items including rice, milk food, edible oils and pulses declined in terms of value with the falling trend in the prices of the commodities in the international market, they added.