Dhaka, Bangladesh (BBN)– The Bangladesh government has resumed the auctions of treasury bills (T-bills) and bonds for the month of March after a month suspension to finance budget deficit partly.

The government is set to borrow BDT 33 billion through holding the auction of T-bills and Bangladesh Government Treasury Bonds (BGTBs) in the current month, according to officials.

The first auction for March of Two-Year BGTBs will be held at the central bank headquarters in the capital Dhaka on Tuesday) to raise BDT 7.0 billion.
Earlier on Sunday, the government borrowed BDT 6.0 billion through holding an auction of T-bills on Sunday. The ranges of the implicit yield of the accepted bids were 3.20-3.40 and 3.58-3.69 per cent respectively.

Talking to the BBN, senior treasury officials of different private commercial banks said yields on the government securities, particularly the BGTBs, may rise in the coming days following higher cost of funds.

They wouldn’t elaborate on the current money-market situation, though it is obvious that cost of mobilising funds is on the upturn amid liquidity shortage.

Such government securities along with the BB bills are being used to meet the SLR (statutory liquidity ratio), the bankers said.

The banks are allowed to maintain the SLR in the form of assets in cash or gold or in the form of un-encumbered approved securities, the market value of which shall not be less than 13 per cent fixed by the central bank.

On the other hand, the government is set to inject BDT 63.50 billion into the market through making payments against maturity of its T-bills and bonds during the period under review, the BB official added.

They also said net injection of funds in the market will stand at BDT 30.50 billion by the end of this month after deduction of gross borrowings worth BDT 33 billion.

The government’s latest move came against the backdrop of holding some excess liquidity recently, the central banker explained.

Currently, the government is holding around BDT 15 billion in excess liquidity in its accounts.

The government had suspended the auctions of both T-bills and BGTBs for the month of February last to use up its excess liquidity.

“Higher sales of savings instruments have pushed up the excess- liquidity balance that have also helped the government lessen its borrowing from the banking system,” another BB official explained.

Slower implementation of projects under the Annual Development Programme (ADP) has also helped the government go on borrowing smaller amounts of funds from the banking system, he added.

Market operators and officials expect that the government bank borrowing may rise in the coming months if the development budget will not be slashed this fiscal year ahead of the general elections.

In the FY 18, BDT 1559.31 billion has earmarked for the ADP, BDT 955.15 billion of which would come from the government’s own fund and rest of BDT 604.16 billion from foreign aid.

Of the sum, 33.35 per cent have been expended in the first seven months of the ongoing fiscal year.

In the draft proposal for revised ADP that will be placed before the National Economic Council on Tuesday, a cut of BDT 49.50 billion from the foreign aid component would be presented, according to officials.

However, the government’s net bank borrowing is still at a negative level, amounting to BDT 153.82 billion as on February 25, mainly due to higher growth in the saving-certificate sales, according to the central bank’s confidential report.

The net sales of savings instruments rose by 1.49 per cent or BDT 3.50 billion to BDT 238.23 billion in the first half of the FY 18 from BDT 234.73 billion in the same period of the previous FY.

In July-December period of the current FY, the government’s net borrowing through savings instruments was more than 79 per cent of the entire fiscal year’s target of BDT 301.50 billion.

Meanwhile, the government had set a bank-borrowing target of BDT 282.03 billion for the ongoing fiscal year (FY) for part- financing of the budget deficit.

Under the proposed bank borrowing, the government will borrow BDT 208.87 billion through issuing long-term bonds while the remaining BDT 73.16 billion through T-bills.

Currently, four T-bills are transacted through auction to adjust government borrowings from the banking system. The T-bills have 14-day, 91-day, 182-day and 364-day maturity periods.

The bills are short-term investment tools issued through auction, conducted by the central bank on behalf of the government.

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