Govt may rearrange sources of borrowing to meet deficit

The government plans to change its stance on borrowing from the country's banking system in the final months of the current financial year to meet the fiscal deficit.  
The public sector bank borrowing reached a new low, negative 0.5 per cent, between July and February this fiscal compared to that of the corresponding of the last fiscal, due to slump in international oil prices and slow pace of implementation of development projects.
Now, the government is likely to borrow more from the banks in view of shortfall in both tax and non-tax revenue earnings.
The target for government borrowing from the banking system is set to be revised upward by over 4.0 per cent to Tk 326.5 billion from the originally estimated amount of Tk 312.2 billion for the ongoing financial year (FY) 2014-15, according to finance ministry's confidential projection.
"The bank borrowing target is set to be revised as a precautionary measure to meet possible shortfall in tax- revenue collection by the end of this fiscal," a senior official, familiar with the government debt-management activities, told the FE.
The tax-revenue receipts have been estimated down at Tk 1.35 trillion in view of the political turmoil and domestic adversities, from the original target set at Tk 1.50 trillion for the FY'15.
Besides, the government budgetary expenditure may rise sharply as implementation of different development projects, particularly the infrastructural ones, will be strengthened in last two months of the financial year, the official explained.
Currently, the government is implementing various mega infrastructure projects that would help boost economic growth potentials.
Such vital undertakings include Padma Multipurpose Bridge, Deep-Sea Port at Sonadia in Cox's Bazar, Dhaka-Chittagong Access Control Highway and Dhaka City Elevated Expressway.
Government's net bank borrowing is still in the negative zone-worth Tk 9.03 billion during the first nine months of the FY-mainly because a phenomenal growth in the savings tools sales.
"The bank borrowing is now under control because of lower subsidy expenditure for downturn in fuel-oil prices on the global market along with higher sale of savings instruments," Dr Biru Paksha Paul, chief economist at Bangladesh Bank (BB), told the FE Tuesday.
The government repaid Tk 9.03 billion more than fresh borrowing from the banking system during July-March period of the FY'15. The payment amount was Tk 7.25 billion in the selfsame period of the previous fiscal, BB data showed.
Lower implementation of the annual development programme (ADP) is also cited by Dr Paul as a major contributor to pegging the borrowing from banks to a negative level.
The execution of programmes under the development budget was reported 43 per cent in nine months to end of March.
"The government may turn on the banking sector to borrow more if the yields on the savings certificates are slashed significantly to align with the market rate, which will reduce government's source of financing through such investment tools," the chief economist noted.
The government earlier targeted borrowing a total of Tk 312.21 billion from the banking system through treasury bills (T-bills) and bonds for the part-financing of budget deficit for this fiscal.
Under the arrangement, the government had decided to borrow Tk 198.24 billion from the banking system by issuing bonds, while Tk 113.97 billion through auction of short-term T-bills.
Currently, three T-bills are being auctioned to adjust government borrowings from the banking system. The T-bills have 91-day, 182-day and 364-day maturity periods.
Furthermore, five government bonds, with two, five, 10, 15 and 20 years' duration, are being traded on the money market.
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