Dhaka, Bangladesh (BBN)– Bangladesh government is going to cut its bank borrowing target by 18.23 per cent for this fiscal year (FY), 2015-16, mainly due to lower implementation of the Annual Development Programme (ADP), officials said.
The target of government borrowing from the country’s banking came down to BDT 315 billion from the original BDT 385.23 billion, according to a finance ministry’s confidential projection.
“The government is revising its bank borrowing target for this fiscal because of lower implementation of ADP and higher sale of its savings instruments in the recent months,” a senior official explained.
The ADP implementation rate came down to 41 per cent in the July-March period of FY 16 from 43 per cent in the same period of the previous fiscal.
The government has already slashed ADP allocation by 6.18 per cent to BDT 910 billion from the original BDT 970-billion outlay amid slower pace in project implementation.
The official also said higher net sale of national savings directorate (NSD) certificates has also contributed to slashing the government’s original bank borrowing target for this fiscal.
The government’s net borrowing through NSD certificates rose by 8.79 per cent to BDT 198.90 billion during the July-February period of FY 16 from BDT 182.83 billion in the same period of the previous fiscal.
The government had set a net borrowing target of BDT 150 billion issuing NSD certificates to partly fund the budget deficit for the current fiscal, according to the budget documents.
“Better yield on the savings instruments than bank deposits is encouraging the small savers to invest more in the risk-free instruments,” the official noted.
Currently, the average interest rate on deposit, offered by the commercial banks, is around 6.0 per cent, while the rate for the savings instruments is on an average 11 per cent.
Meanwhile, the government paid BDT 53.44 billion more than that of fresh borrowing from the banking system until April 11 in FY 16, according to the Bangladesh Bank’s (BB) latest statistics.
The payment was BDT 102.96 billion in the same period of the previous fiscal, the BB data showed.
The government’s borrowing from the banking system may increase in the next two months of this fiscal to meet its higher development expenditure, according to the official.
BBN/SSR/AD