The government has increased its bank borrowing target by more than 54 per cent to nearly Tk 730 billion to partly finance the budget deficit of the current fiscal year, officials said.
The government's net bank borrowing target has been revised at Tk 729.51 billion from the original goal of Tk 473.64 billion for FY 2019-20, an official familiar with the government debt management activities told the FE on Tuesday.
He said the government borrowed a total of Tk 580 billion from the banking system until April 30 of the FY '20 to meet its budget gap.
The official feared borrowing from the banking system by the government may exceed the revised target by the end of this fiscal, due mainly to the adverse impact of the coronavirus pandemic.
"Expenditure, particularly in the health sector, has increased sharply for curbing the spread of deadly virual disease," he noted.
He also said the ministry of finance has finalised the revised bank borrowing target before the coronavirus arrived in the country.
Gross borrowing this month alone could amount to Tk 170 billion after issuing treasury bills, or T-bills, and bonds, according to the recent auction calendar, issued by the Bangladesh Bank, or BB.
The auction calendar means the schedule and the amount of T-bills and bonds to be issued for raising funds from the market to partly finance the budget imbalance.
Also, the government's net bank borrowing may reach Tk 70.80 billion this month, after deducting Tk 99.20 billion against the government securities, which will mature during the period.
Currently, four 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.
Five government bonds with the tenures of 02, 05, 10, 15 and 20 years respectively are also traded on the money market.
Talking to the FE, a BB senior official said the government is still facing deficit balance in its account following lower revenue collection along with the ongoing falling trend in sales of national savings certificates.
The government's account deficit stood at around Tk 130 billion as on May 03, which was plugged by the ways and means advances along with the overdraft drawing facilities from the central bank, according to the BB official.
Under the existing rules, the government is empowered to borrow a maximum of Tk 60 billion from the central bank's WMA facility without issuing any securities.
After availing the WMAs facility, the government may use OD drawing facility from the central bank as well in case its negative account balance crosses Tk 60 billion.
"The government has already used both WMAs and OD drawing facilities from the central bank to meet its account deficit," the central banker said.
Besides, the government borrowed Tk 77 billion instead of Tk 60 billion as per the auction calendar by issuing its securities on Tuesday to ensure surplus account, he added.
Senior bankers, however, said the country's money market is now stable following the central bank's recent policy support.
The banks are eligible for accessing more than Tk 190 billion as loanable funds since the central bank had slashed the cash reserve requirement (CRR) by 150 basis points to 4.0 per cent from 5.50 per cent earlier.
"The government's higher bank borrowing may exert extra pressure on the market if the central bank does not provide required liquidity support to the banks properly," a senior executive of a leading private commercial bank (PCB) told the FE.
The private banker also urged the central bank to devolve major portion of borrowing amount on its own accounts, which would help boost money supply in the market.
A BB senior official said that the central bank would act in response to the market's requirements.
