Dhaka, Bangladesh (BBN)– Bangladesh government is set to raise bank borrowing significantly in September as part of financing its budget deficit for this fiscal year (FY), officials said.

According to the latest auction calendar, the government may borrow upto BDT 130 billion from the banking system by the end of this month by issuing treasury bills (T-bills) and bonds.

The gross bank borrowing figure was BDT 18 billion for August, but BDT 138 billion in July, according to Bangladesh Bank (BB) officials.

They said the net bank borrowing is set to reach BDT 30.50 billion by the end of September after deducting BDT 99.50 billion as maturity of the government securities from the gross borrowing.

Under the arrangement, the government will have to pay BDT 90 billion out of BDT 99.50 billion against the maturity of its securities, particularly 91-Day T-bills in September.

The government’s net bank borrowing was nearly BDT 40.39 billion as on August 19, according to the BB’s confidential report.

The central bank officials said the government has already availed partially both overdraft (OD) drawing facilities and ways and means advances (WMAs) from the central bank to meet its budgetary expenses.

The government is now empowered to borrow up to BDT 40 billion from the central bank under the advances to meet its day-to-day expenditures without issuing any securities.

Besides, the government’s limit for overdraft drawing from the central bank has been capped at BDT 40 billion.
Currently, the government is holding negative balance amounting to nearly BDT 45 billion in its accounts, according to a senior official familiar with the government debt-management activities.

The official also said the trend in government’s bank borrowing for the next month will depend on the overall revenue collection until the last week of September.

Senior bankers, however, did not see any major impact on such borrowings from the market, saying that it might not create any extra pressure on the money market.

Talking to the BBN, a senior treasury official of a leading private commercial bank (PCB) said the overall market situation is now normal despite higher transactions in the inter-bank call money market.

Some banks are running their businesses with ‘liquidity funding shortages’, the treasury official explained.

The ministry of finance had set a bank-borrowing target of BDT 420.29 billion for the FY 2018-19 to finance the budget deficit.

Under the proposed bank borrowing, the government will borrow BDT 239.65 billion issuing long-term bonds while the remaining BDT 180.64 billion through T-bills.

Currently, four T-bills are being transacted through auctions to adjust the government’s borrowings from the banking system.

The T-bills have 14-day, 91-day, 182-day and 364-day maturity periods.

Also, five government bonds, with tenures of two, five, 10, 15 and 20 years respectively, are traded on the market.