The government is set to fix the net bank borrowing target at Tk 22 billion for December to finance budget deficit partly ahead of the general election, officials said.
It may take up to Tk 136 billion as gross borrowing from the banking system in December by issuing treasury bills (T-bills) and bonds, according to the auction calendar of the Bangladesh Bank (BB), released on Thursday.
The gross bank borrowing amount was Tk 32 billion in November, and Tk 20 billion in October.
The government's net bank borrowing will reach Tk 22 billion by the end of next month, after deducting Tk 114 billion as maturity amount of the government securities from the gross borrowing amount, according to a BB senior official.
Talking to the FE, a senior official familiar with the government debt-management activities said the auction calendar may be revised like this month, if necessary.
On November 19, the government revised its auction calendar, keeping an option for borrowing Tk 20 billion more for financing budget deficit ahead of the general polls, scheduled to be held on December 30.
Under the revised calendar, the government's net borrowing from the banking system was Tk 30.42 billion in November, compared with Tk 10.42 billion as targeted earlier.
"We've reviewed the government's overall bank borrowing situation at a meeting of Cash and Debt Management Committee (CDMC) on Thursday," the official said without elaborating.
Senior bankers, however, see a slight adverse impact of such borrowing in the market, saying that it might create extra pressure on the money market.
Besides, BB's continuous selling of the US dollar to the banks may push up demand for Bangladesh Taka (BDT) in the near future in the market, they explained.
The weighted average rate (WAR) on call money rose to 3.62 per cent on Wednesday from 3.59 per cent of the previous working day, the BB data showed.
The central bank resumed offering the support by selling the US currency directly to the banks in recent months to keep the foreign exchange market stable.
As part of the move, BB sold US$ 30 million directly to four commercial banks on Thursday to meet the growing demand for the greenback in the market.
On Wednesday, BB also sold $40 million to two state-owned commercial banks (SoCBs) on the same ground.
A total of $906 million was sold to the commercial banks from July to November as part of its ongoing support, according to the central bank's latest data.
"The demand for local currency may increase in the market, if the existing trend of the government's bank borrowing and BB's selling of the US currency continues," a treasury official of a leading private commercial bank (PCB) told the FE.
Ministry of Finance had set a bank borrowing target of Tk 420.29 billion for fiscal year 2018-19 to finance the budget deficit.
Under the proposed bank borrowing, the government will borrow Tk 239.65 billion by issuing long-term bonds, while the remaining Tk 180.64 billion through treasury bills (T-bills).
Currently, four T-bills are being transacted through auctions to adjust the government's borrowing from the banking system. The T-bills have 14-day, 91-day, 182-day and 364-day maturity periods.
Also, five government bonds with tenures of two, five, 10, 15 and 20 years respectively are traded on the market.
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