The government's bank borrowing is set to pick up significantly in May following revenue target shortfall in recent months, officials and bankers said.
Faster execution of Annual Development Programme (ADP) along with extra-pressure on festival bonus ahead of the Eid-ul-Fitr has forced the government to revise its auction calendar with keeping Tk 40 billion extra borrowing arrangement, they explained.
Normally, the implementation rate of ADP goes up with faster speed in the last two months of each fiscal year, they added.
They also predicted that the upward trend in the government's bank borrowing may continue until June.
The authorities have already set the net bank borrowing target at more than Tk 67 billion only for May 2019 to finance budget deficit, according to the revised auction calendar, issued by the Bangladesh Bank (BB) on Monday.
The net government's bank borrowing figure was Tk 27.25 billion, according to the original auction for May.
As per revised calendar, the government may take up to Tk 88 billion as gross borrowing from the banking system this month by issuing treasury bills (T-bills) and bonds.
The government's net bank borrowing is set to reach Tk 67.25 billion by the end of this month, after deducting Tk 30.75 billion as maturity amount of the government securities from the gross borrowing amount, the BB officials said.
Besides, Tk 20 billion was borrowed through issuing short-term 14-day T-bills on Monday, which will be cleared on May 27, they added.
"There will be no effect on the overall net borrowing for the month of May," a senior BB official told the FE on Monday.
The government has revised auction calendar after turning its account balance into negative territory from surplus position in the recent days, the central banker explained.
Senior bankers, however, expressed concern over such higher bank borrowing of the government, saying that it might adversely impact on the money market before the Eid festival.
"The market will be dry before the Eid if the government borrows entire amount from the scheduled banks," a treasury head of a leading private commercial bank (PCB) told the FE.
On the other hand, such borrowing will help increase money supply in the market if the entire or major portion of borrowing amount will be devolved on the central bank, according to the senior treasury official.
Syed Mahbubur Rahman, chairman of the Association of Bankers, Bangladesh (ABB), urged the central bank to take extra amount of borrowing money in its own accounts through devolvement.
He also said higher bank borrowing by the government may continue until June as the implementation of the ADP will pick up speed.
"Besides, revenue shortfall will force the government to borrow more from the banking system to meet the budget deficit partly," the senior banker explained.
The National Board of Revenue (NBR) had faced more than Tk 504 billion shortfall against its target in the July-March period of the current fiscal year (FY) 2018-19.
The Ministry of Finance had set a bank borrowing target of Tk 420.29 billion for the FY 19 to partly 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 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 in the market.
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