Move on to make govt borrowing tools more competitive

The central bank has taken a fresh move to develop the existing management of the government's key borrowing tools-overdraft current (ODC), official said.
The government borrows a significant amount from this vital source to fund its budget deficit, sources said.
However, a high-powered government team comprising the ministry of finance (MoF) and the central bank official will visit India last week of the current month to gather knowledge on the issue.
The BB which has been maintaining close relationship with the central bank of India- Reserve Bank of India (RBI)--will visit the RBI and officials concerned on how to make the borrowing tool most efficient, the central bank sources said.
 "We just want a replica of the best practices in India and the neighbouring nations," said an official working at its debt management department.
The visit named "Exposure tour" is mainly for achieving knowledge on overdraft current (ODC) and Ways and Means Advance (WMA) management of the neighbouring India, officials of the MoF and the BB told the FE.
During the tour period, the team will meet with RBI and finance ministry of India officials concerned of the schedule country more than once.
The MoF and the central bank sources said they are now in contact with the Reserve Bank of India (RBI) in this connection.
 "We are also trying to communicate with other countries which are enough knowledge in the fields concerned," they said.
The MoF has already put a cap on the government's borrowing from the Bangladesh Bank (BB) through ODC limiting it to Tk 40 billion. The new limit will come into effect on April 01 next, according to sources.
The ministry of finance (MoF) is likely to reduce further the government's borrowing from the central bank by using the overdraft-current (ODC) tool, officials have said.
Based on performance in the current fiscal year (FY) 2013-14 the limit would be lowered further in the FY 2014-15, mentioned the working paper of the 27th meeting of the MoF's Cash and Debt Management Committee (CDMC) held on December 30 last.
The cap was put on ODC loans mainly to bring discipline in the government's borrowing, sources of the MoF, told FE.
When effective, the cap would help reduce the government's capacity of taking loans by using the ODC tool and in that case the inflation rate would not go up, sources said.
The BB usually gives such loans to the government after issuing fresh currency notes, which pushes up the inflation rate.
The government's borrowing through ODC stood at Tk 7.20 billion in December last against Tk 72.05 billion in June last.
The government mainly borrows from the central bank through the WMA, overdraft, sources said.
The government can borrow from the BB through overdraft, when it requires more loans excluding the scheduled auction calendar for banks. The government usually takes loans from the banking sector by issuing treasury bills and T-bonds on scheduled dates on the auction calendar.
The government imposed the cap on ODC loans in accordance with suggestions of the International Monetary Fund (IMF), sources concerned said.