The government is set to borrow significantly high amounts from banks in July for adjusting higher expenditure in June and part financing of its budget deficit for the current fiscal.
Officials said the borrowings from the banking system could run up to Tk 123.50 billion, according to the auction calendar released by Bangladesh Bank (BB) Sunday for the current month.
The money will be taken by issuing instruments like treasury bills (T-bills) and bonds.
Such gross bank-borrowing figure was Tk 108.50 billion for June 2016.
"The government borrowing from the banking system has already been increased significantly to meet higher expenditure for the last month of the FY'16," a senior official familiar with the government debt-management activities told the FE.
The implementation of development projects normally becomes faster during the last month of every fiscal, the official explained.
Besides, full implementation of the new national pay scale has forced the government to borrow more from the banking system, according to the official.
As part of the move, the government borrowed nearly Tk 60 billion through issuing its treasury bills (T-bills) on June 30 last at a special auction instead of Tk 35 billion to meet its budgetary expenditures.
The yields on T-bills, particularly 91-day and 128-day ones, increased significantly at the auction mainly due to higher borrowing by the government, a senior treasury official of a leading private commercial bank (PCB) told the FE.
The yield, generally known as interest rate on 91-day T-bill, rose to 4.04-4.75 per cent on June 30 last from 4.05-4.13 per cent on June 26, 2016 while the rate on 182-day T-bills stood at 4.70-5.05 per cent from 4.56-4.70 per cent, according to the auction results.
"Such rising trend in interest rates on T-bills may continue in the near future," the private banker hinted.
The government has started to avail overdraft (OD) drawing facilities from the central bank after using ways and means advances (WMAs) partly to finance its budget deficit, according to a source close to the government's debt-management activities.
The government is now empowered to borrow up to Tk 40 billion from the central bank under the WMAs to meet its day-to-day expenditures without issuing any securities.
Besides, government's limit for overdraft (OD) drawing from the BB has been fixed at Tk 40 billion.
"We're now calculating the net government borrowing from the banking system in the just-concluded fiscal year," a senior official of the Bangladesh Bank told the FE.
The government has set a bank-borrowing target at Tk 389.38 billion for the current FY, 2016-17.
Under the proposed arrangement, Tk 289.10 billion will be borrowed from the banking system by issuing long-term Bangladesh Government Treasury Bonds (BGTBs) while the remaining Tk 100.28 billion through auctions of short-term T-bills.
Currently, three treasury bills (T-bills) are being transacted through auctions 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 tenures of two, five, 10, 15 and 20 years are traded on the money market.
Source: The Financial Express