Dhaka, Bangladesh (BBN) – The government borrowing from the banking system exceeded marginally the revised target set for the fiscal ended on June 30, 2009, officials said on Saturday.

They also said the borrowing in the fiscal was ‘well below’ of the original target.

The government borrowed US$1.59 billion (BDT109.64 billion) from banking system in fiscal 2008-09 (FY09) through treasury bills (T-bills) and bonds against the revised target of $1.55 billion (BDT 106.98 billion) to meet its budgetary expenditures, they confirmed.

“The government borrowing has increased slightly against the revised target mainly due to increase in the current expenditure vis-à-vis the shortfall in revenue collection by the National Board of Revenue (NBR),” a senior official of the Bangladesh Bank (BB), the country’s central bank, told BBN in Dhaka.   

A total of $7.60 billion (BDT 524.76 billion) was collected by the NBR in FY09 against the revised target of $7.68 billion (BDT 530 billion).

“We’ve tried to achieve the revised revenue collection target in FY09. But falling trend in the prices of major commodities in the global market has lowered collection of import duties,” an NBR senior official said.  

In May, 2009, the government slashed its borrowing target, for the first time, from banking system by around $434.78 million (BDT 30 billion) due mainly to the less-than-expected implementation of the Annual Development Program (ADP) for FY09.

The government had revised the borrowing target at around $1.55 billion (BDT 106.98 billion) from the original target of $1.96 billion (BDT 134.98 billion), according to the budget documents.  

The government has set a net borrowing target of $1.14 billion (BDT 78.71 billion) from the country’s banking system to finance the budget deficit for the first half of fiscal FY10.

During FY10, the government will borrow a total of $2.43 billion (BDT 167.55 billion) from the commercial banks and financial institutions through T-bills and bonds.

“The projected $2.43 billion (BDT 167.6 billion) domestic bank borrowing in FY10 budget is somewhat larger than the original one for the last fiscal, but there should not be any reason to be concerned about the private sector borrowing needs being crowded out, given the current liquidity overhang in the market,” the central bank said in its latest monetary policy, released on July 19.

Indeed, in a situation like the present sluggish private sector investment activities, expanded public sector borrowing for development activities is actually helpful since it ensures the liquidity overhang to good use in pacing up growth momentum, the monetary policy added.

“Even in years of tighter monetary conditions in the past, government’s bank borrowing projected in the annual budgets never crowded out private sector borrowing needs, because every year the initial budgetary public expenditure programs underwent subsequent downsizing, requiring lower bank borrowing than the initial projections,” the BB noted.

Currently, three T-bills are being transacted through auctions to adjust the government borrowing from the banking system.

The T-bills have 91-day, 182-day and 364-day maturity periods.

On the other hand, four government bonds – 5-year, 10-year, 15-year and 20-year –are being traded in the markets.

BBN/SSR/SI/AD-26July09-1:50 am (BST)