The government borrowing from the banking system more than doubled in the outgoing fiscal year (FY) to partly finance its budget deficit, officials said on Wednesday.
Its borrowing from the banking system rose to Tk 264.46 billion as on June 30 last from Tk 117.31 billion in the same period of the previous fiscal, according to the Bangladesh Bank (BB)'s confidential report.
The bank borrowing of the government, however, was lower than both original and revised targets for FY 2018-19, they added.
Earlier, the government slashed its bank borrowing target to Tk 308.95 billion for the FY '19 from the original target at Tk 420.29 billion, according to the budget documents.
Higher revenue shortfall has forced the government to borrow more from the banking system to meet the budget deficit particularly for implementation of mega projects, they explained.
The National Board of Revenue (NBR) had faced Tk 0.66 trillion shortfall against its revised target for the outgoing fiscal year, according to the provisional figures.
"Major portion of fund was borrowed by the government during the last two months of FY '19 for making payments to the contractors for implementation of different development projects," a senior official familiar with the government debt management activities told the FE.
Faster execution of the Annual Development Programme (ADP) during the May-June period of the FY '19 also pushed up the government's bank borrowing, the official explained.
Normally, the implementation rate of ADP gathers up pace during the last two months of each fiscal year.
Besides, decreasing trend in sales of national savings certificates in the month of May has also contributed to push up the bank borrowing of the government, according to the official.
Net sales of national savings instruments fell by 1.33 per cent to Tk 32.58 billion in May 2019 from over Tk 33 billion in the same month of 2018, the official figures showed.
Talking to the FE, a senior BB official said the government had availed of ways and means advances (WMAs) around Tk 10 billion to finance the budget deficit in the FY '19.
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.
In addition, the government is entitled to borrow a maximum of Tk 40 billion through overdraft (OD) drawing facility from the central bank on the same ground.
"But the government did not avail OD facility from the BB until June 30," the official said while replying to a query.
Quoting budget documents, the central banker said the rising trend of the government bank borrowing may continue in the current fiscal year.
The government has already made higher borrowing from the banking system to finance budget deficit partly for the ongoing FY '20.
Its bank borrowing is set to be Tk 473.64 billion for the FY 20 from Tk 308.95 billion in the previous year, according to the budget documents.
Under the arrangement, the government will borrow Tk 280.94 billion issuing long-term bonds while garnering the remaining Tk 192.70 billion through treasury bills (T-bills).
Currently, four treasury bills (T-bills) are being transacted through auctions to adjust the government's borrowings from the banking system. The T-bills have 14-day, 91-day, 182-day and 364-day maturity periods.
Furthermore, five government bonds, with tenures of two, five, 10, 15 and 20 years respectively, are traded on the market.
When contacted, a senior executive of a leading primary dealer bank said liquidity pressure along with interest rate may increase if the rising trend of the government bank borrowing continues.
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