Govt credit from banks soars 77pc

The government's borrowing from the banking system soared more than 77 per cent year-on-year in the first 63 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 107.14 billion until September 01 of this FY, against Tk 62.28 billion in the same period a year ago, according to the central bank's latest statistics.
A major portion of borrowed fund from the country's commercial banks has already been used for clearing outstanding with the Bangladesh Bank (BB) under ways and means and overdraft facilities, an official close to the public debt management-related activities told the FE.
The government borrowed a substantial amount of money from BB using ways and means and overdraft to meet budgetary expenditure from the beginning of July to middle of August, according to the official.
The official also said more than Tk 80 billion has already been repaid to the central bank to clear outstanding under ways and means and overdraft accounts.
Currently, there are no outstanding balances under two accounts, according to official data.
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 was suspended for July to meet higher budgetary expenses during the period, another official said.
"The ongoing trend indicates that the government's borrowing from the banking system may rise in FY 16, as implementation of different mega development projects, particularly the infrastructural ones, are gearing up gradually," the official opined.
The government is now implementing various infrastructure projects, including Padma Multipurpose Bridge, Deep-Seaport at Sonadia in Cox's Bazar, Dhaka-Chittagong Access Control Highway, and Dhaka City Elevated Expressway, which would help boost economic growth.
On the other hand, the government's borrowing from the national savings instruments came down to Tk 19.76 billion in July from Tk 21.70 billion a month ago, due to cut in their yield rates recently.
"There is enough liquidity supply in the banking system. So the credit flow to private sector will not be affected by the government's bank borrowing," a BB senior official told the FE on Thursday.
The overall excess liquidity with the commercial banks stood at around Tk 1.14 trillion as of July 31. 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 36 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 through 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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