Govt to borrow more from banking sector
Friday, 11 June 2010
FE Report
The government will borrow more from the banking sector than from non-banking sources to fund the budget deficit for the fiscal year 2010-11 (FY11).
It is set to borrow Tk 156.80 billion from the banking system, up by 81.04 per cent from the revised budget for FY10 and Tk 80 billion from non-banking sources particularly from national savings schemes, down by 7.66 per cent, according to the proposed budget for FY11.
Under the proposed budget, Tk 125.70 billion will be borrowed by issuing long-term bonds while the remaining Tk 31.10 billion will come through treasury bills (T-bills).
Finance Minister Abul Maal Abdul Muhith said a major portion of the domestic borrowing comes from the national savings schemes.
"We are aware that these schemes largely benefit the middle and low income families as social securities. We, therefore, support that the interest rate of these schemes will be higher than those of other borrowing instruments," the minister said in his budget speech Thursday.
However, the interest rates of all the borrowing instruments should be harmonized, the minister said, adding: "We expect to formulate an acceptable policy to rationalise the limit, amount and interest rates of borrowings."
Earlier, the ministry revised the government's bank borrowing target for FY10 down to Tk 86.61 billion from the original Tk 167.55 billion.
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 on the market.
The government will borrow more from the banking sector than from non-banking sources to fund the budget deficit for the fiscal year 2010-11 (FY11).
It is set to borrow Tk 156.80 billion from the banking system, up by 81.04 per cent from the revised budget for FY10 and Tk 80 billion from non-banking sources particularly from national savings schemes, down by 7.66 per cent, according to the proposed budget for FY11.
Under the proposed budget, Tk 125.70 billion will be borrowed by issuing long-term bonds while the remaining Tk 31.10 billion will come through treasury bills (T-bills).
Finance Minister Abul Maal Abdul Muhith said a major portion of the domestic borrowing comes from the national savings schemes.
"We are aware that these schemes largely benefit the middle and low income families as social securities. We, therefore, support that the interest rate of these schemes will be higher than those of other borrowing instruments," the minister said in his budget speech Thursday.
However, the interest rates of all the borrowing instruments should be harmonized, the minister said, adding: "We expect to formulate an acceptable policy to rationalise the limit, amount and interest rates of borrowings."
Earlier, the ministry revised the government's bank borrowing target for FY10 down to Tk 86.61 billion from the original Tk 167.55 billion.
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 on the market.