The government has no plan to borrow from the banking system in February mainly as there's enough in its account these days, officials say.
The Ministry of Finance (MoF) has set zero net bank-borrowing target for the month, according to the auction calendar issued by Bangladesh Bank (BB) recently.
According to the calendar, the government may take up to Tk 84.50 billion as gross borrowing from the banking system this month by issuing treasury bills (T-bills) and bonds.
This calendar gives the schedule and the amount of T-bills and bonds to be issued through auction for raising funds from the market to partly finance government's budget deficit.
The zero bank borrowing would be achieved after deducting the same amount of funds against the government securities which would mature this month, according to the central bank officials.
This target came against the backdrop of recent adequate liquidity in the government's account, they said.
The government account was awash with around Tk 180 billion in excess liquidity on January 30.
But the surplus amount came down to around Tk 120 billion on February 01 from the previous level - after making payment for regular monthly salaries and wages of government employees, according to the officials.
"Slow implementation of the Annual Development Programme (ADP) in recent months has pushed down government borrowings from the banking system," a senior government official told the FE on Sunday.
According to official figures, implementation rate of the Tk 2,367.93-billion ADP has been only 24.04 per cent in the first six months of the current fiscal year (FY), 2021-22.
He also says issuing the Shariah-based Sukuk bond has helped boost liquidity in the government account.
On December 29, the government received Tk 50 billion through issuing the Bangladesh Government Investment Sukuk (BGIS), generally known as Ijarah Sukuk, for implementation of a need-based government primary school- development project by 2023.
Higher revenue collection has also helped the government opt for lower borrowing from the banking system during the period under review, according to the official.
Revenue collection by the National Board of Revenue (NBR) grew by 14.21 per cent to Tk 1,262.09 billion during the July-December period of FY 22 from Tk 11,05.01 billion in the same period of the previous fiscal year.
Meanwhile, the aggregate net borrowings from banks stood at Tk 149.45 billion on January 24, according to the Bangladesh Bank's confidential report, obtained by the FE.
Actually, the government borrowed Tk 313.25 billion during the period under review from the scheduled banks by issuing T-bills and bonds, but repaid Tk 163.79 billion to the central bank, the BB data show.
During the period, the government also borrowed Tk 23.36 billion from non-banking sources through net issuance of T-bills and bonds.
"Therefore, from 30 June 2021 to 24 January 2022 of FY 22, the government borrowed a total of Tk 172.82 billion from domestic sources, excluding net sales of National Savings Certificates (NSCs)," the central bank says in the report.
Talking to the FE, Syed Mahbubur Rahman, managing director and chief executive officer of Mutual Trust Bank Limited, said yield on the government securities is likely to fall if such lower bank borrowing continued.
Market operators, however, project that such bank borrowing of the government may push up the amount of excess liquidity in the country's banking system.
"Higher amount of excess liquidity will force the banks to cut their interest rates immediately, particularly on the inter-bank call money market," a senior executive of a leading private commercial bank (PCB) said while replying to a query.
Earlier, the government had set a lower borrowing target from the banking system to meet the budget deficit in FY 2021-22.
Its bank borrowing is set to be Tk 764.52 billion for FY 22 from the revised target of Tk 797.49 billion for the past fiscal year, according to the budget documents.
Under the arrangement, the government would borrow Tk 516 billion by issuing long-term BGTBs, generally known as bonds, while the remaining Tk 248.52 billion through T-bills.
The original target for FY 21 was Tk 849.80 billion. But, the government slashed its bank-borrowing target by more than 6.0 per cent to Tk 797.49 billion following lower implementation of the ADP.
