Dhaka, Bangladesh (BBN) – The government’s net borrowing from banking system surged in the recent weeks due mainly to release of Padma Bridge construction funds and disbursement of export insensitive, officials said.
Its net borrowing from banking system shot up to BDT 70.52 billion in the first 23 days of this fiscal year (FY) 2014-15 as against negative of BDT 13.84 billion in the corresponding period of the last fiscal year, according to the central bank statistics, released on Tuesday.
“The government’s bank borrowing has increased significantly during the period under review due mainly to meet the growing cash incentive requirements particularly of apparel and clothing sectors and releasing funds for Padma Bridge construction,” a senior official said.
The government has borrowed BDT 7.76 billion from all scheduled banks through issuing treasury bills (T-bills) and bonds during the period while BDT 62.76 billion from the central bank to partly finance the budget deficit for the ongoing FY ’15.
The government has also released funds for development of energy, power and education sectors, the official added.
The government borrowing from the banking system may not exceed target by the end of this fiscal year due mainly to higher net sale of savings instruments, according to the official. “Higher interest rates on the savings instruments are encouraging the small savers to invest more in the risk-free tools.”
Currently, average interest rate on deposit, offered by the commercial banks, is around 8.0 per cent while the rate for savings instruments is paid on an average rate of 13 per cent, the market operators said.
During FY ’15, the government is set to borrow a total of BDT 312.21 billion from the banking system through 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-06Agu14-1:10 am (BST)