The government is set to increase bank borrowing in June partly to finance its budget deficit by the end of ongoing fiscal year (FY) 2015-16, officials said.
It may borrow Tk 108.50 billion from the banking system with issuing treasury bills (T-bills) and bonds in the month of June, according to the auction calendar, released by the Bangladesh Bank (BB).
Such gross bank borrowing figure has already been fixed at Tk 68.50 billion for May 2016.
Total gross bank borrowing by the government is expected to reach Tk 177 billion during the last two months of the FY 16, according to the calendar.
The implementation of development projects normally becomes faster during the May-June period of every fiscal, a BB official told the FE Thursday while explaining the main objective of such borrowing.
The government's net bank borrowing is likely to stand at around Tk 97 billion during the period under review after deduction of the securities maturity, the official added.
 "The government may use ways and means advances (WMAs) and overdraft (OD) drawing facilities from the central bank to meet higher budgetary expenses," the central bank hinted.
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.
Besides, the government's limit for overdraft (OD) drawing from the BB has been fixed at Tk 40 billion.
However, a source close to the government's debt management activities, said the government may not achieve its revised bank borrowing target even after using WMAs and OD drawing facilities by the end of the FY 16 if the existing borrowing trend continues.
The Ministry of Finance (MoF) has already slashed bank borrowing target by more than 18 per cent to Tk 315 billion for the FY '16 from the original Tk 385.23 billion mainly due to lower implementation of the Annual Development Programme (ADP).
In the FY '15, the government's net borrowing target was revised upward to Tk 317.14 billion from the banking system from the original target of Tk 312.21 billion.
Lastly, the government had borrowed only Tk 20 billion from the banking system in the FY '15, the source said.
Meanwhile, the government paid Tk 76.53 billion more than that of fresh borrowing from the banking system until April 21 in FY 16, according to the central bank latest confidential report.
Such payment was Tk 690 million in the same period of the previous fiscal, the BB data showed.
"The government is still borrowing less from the banking system because of holding of adequate amount of liquid money recently," another BB official explained.
Currently, the government is holding around Tk 20 billion excess liquidity in its accounts, the central banker added.
Now three treasury bills (T-bills) are being transacted through auctions to adjust the government borrowings from the banking system. The T-bills have 91-day, 182-day and 364-day maturity periods.
Furthermore, five government bonds with tenures of two, five, 10, 15 and 20 years are traded in the money market.
siddique.islam@gmail.com [Read More]

—–
Source: The Financial Express