Dhaka, Bangladesh (BBN)- The government has borrowed more money from commercial banks than the central bank aiming to help ease inflationary pressure on the economy, officials said.
Under the new strategy, the government's borrowing from the central bank came down to only BDT 24.50 billion on May 20 last from BDT 140.06 billion on December 5 last year, according to the central bank statistics.
On the other hand, the government's borrowing from all 47 scheduled banks rose to BDT 152.93 billion during the period under review from BDT 81.28 billion.
The government's net borrowing from banking system shot up to BDT 177.43 billion on May 20 this year as against BDT 102.34 billion in the same period the previous year.
"The government has borrowed from the banking system in line with the coordination between the existing fiscal and monetary policies," a senior official of the Bangladesh Bank (BB) said.
He also said most of the borrowed funds from the Bangladesh Bank (BB) are treated as 'high-powered money' which has multiple effects on the economy including fuelling inflation.
Lower borrowing from the BB has helped to decrease the reserve money growth in recent months, the central banker added.
The reserve money growth came to 11.85 percent in March 12 on a year-on-year basis from 29.06 percent in the corresponding month of the previous year, the BB data showed.
"Both reserve money and government's borrowing from the central bank may rise by the end of June following ending of the fiscal year," the BB official said.
He also said the government's borrowing normally increased in the last month of each fiscal year due to higher implementation of annual development program (ADP).
Besides, new provisions of development relating the government-approved securities will push up the government's borrowing from the BB unit June 2012.
Under the existing provisions, the central bank takes 38 per cent of total fund of both treasury bills (T-bills) and bonds auctions on its own account to ease liquidity pressure of the primary dealers (PDs).
The central bank has taken the latest measure against the backdrop of rising bank borrowing target by the government recently to finance the budget deficit of the current fiscal year ending June.
Under the revised target, the government can borrow BDT 279 billion from the country's banking system against the original budgetary target of BDT 189.57 billion.
The central bank earlier selected 15 PDs -- 12 banks and three non-banking financial institutions (NBFIs) -- to deal with government securities in the secondary market.
BBN/SSR/AD-24May12-8:00 am (BST)
