Dhaka, Bangladesh (BBN)– The government’s borrowing from the banking system increased significantly in the first 15 days of the current financial year (FY) 2014-15 compared with that in the same period of the FY14.

The borrowing from the banks by the government jumped at BDT 33.84 billion until July 15 against only BDT 1.16 billion in the same period of the last fiscal, according to the Bangladesh Bank (BB) statistics.

“The government borrowing from the banking system jumped during the period under review due mainly to pay salaries and festival bonus to its employees before the Eid festival,” a BB senior official explained.

He also said the government borrowing may increase significantly this financial year as it would start the implementation process of its committed mega public projects including the Padma Multipurpose Bridge in the shortest possible time.

The government’s net borrowing from the banking system to partly finance its budget deficit drastically fell by nearly 68 per cent in the FY 14.

Its borrowing from the banking system came down to BDT 79.51 billion until June 30 last from BDT 245.71 billion in the corresponding period of the previous year, the BB data showed.

The Ministry of Finance (MoF) earlier set borrowing target from the banking system at BDT 259.93 billion for the last fiscal, while it was revised to BDT 299.82 billion lastly.

“The government borrowing from the banking system has dropped significantly during the period under review mainly due to higher sales of savings instruments,” another BB official said.

Slashing fund for implementation of the Annual Development Programme (ADP) for the FY2014 has also contributed to less borrowing from the banking system, the official observed.

The BB official said the government borrowed BDT 240.11 billion, in gross terms, from the commercial banks through issuing different bonds and treasury bills (T-bills) in the FY 14, while it repaid BDT 160.60 billion to the central bank.

During FY 15, the government is set to borrow a total of BDT 312.21 billion from the banking system through treasury bills (T-bills) and bonds to partly finance its budget deficit.

Under the arrangement, the government has decided to borrow BDT 198.24 billion from the banking system by issuing bonds, while BDT 113.97 billion will be borrowed through auctions of short term T-bills.

Currently, three T-bills are being transacted through auctions to adjust the government’s borrowing from the banking system. The T-bills have 91-day, 182-day and 364-day maturity periods.

Furthermore, five government bonds with duration of two, five, 10, 15 and 20 years respectively – are being traded in the market.

BBN/SSR/AD-01Aug14-4:54 pm (BST)