Dhaka, Bangladesh (BBN)- Bangladesh government is set to borrow BDT 12.50 billion from the country’s banking system this month —the lowest single-month tally in the ongoing fiscal year—after slashing its target drastically for the last 13 days of January.
Bankers, however, expressed concerned over lower bank borrowing by the government, saying that it would push up excess liquidity with the banks as well as erode their profitability.
Bangladesh Bank (BB), the country’s central bank, has already sent the auction calendar on government Treasury Bills (T-bills) and Bangladesh Government Treasury Bonds (BGTBs) for the month of February to the commercial banks.
“The central bank has announced the auction calendar for the current month in line with the finance ministry advice,” a BB senior official told BBN in Dhaka.
Under the funding arrangement, the government is set to borrow BDT 10 billion with T-bills and the remaining BDT 2.50 billion would be borrowed by issuing BGTBs.
Talking to BBN, a senior official close to the government debt-management activities said the Ministry of Finance has finalised the auction calendar for the month of February considering proper use of excess liquidity with the government.
Currently, government holds around BDT 60 billion in surplus liquidity in its accounts.
Lower implementation of Annual Development Programme (ADP) projects and higher sales of savings instruments tipped the balance and helped the government lessen borrowing from the banking system, he explained.
Earlier, the government had slashed its bank-borrowing target nearly 59 per cent to BDT 14 billion through issuing its treasury bills and bonds from January 19 to January 31 instead of BDT 34 billion.
“Interest rates on both lending and deposit may fall further in the coming months if the lower level of government’s bank borrowing continues,” a senior official of a leading private commercial bank (PCB) observed.
He also said falling trend of the government bank borrowing is hampering business plans of the banks.
The government is set to borrow BDT 385.23 billion from the country’s banking system through issuing both short-and long-term securities during the current fiscal.
Under the proposed arrangement, BDT 241.82 billion will be borrowed by issuing long-term BGTBs while the remaining BDT 143.41 billion through auction of short-term T-bills.
Currently, three T-bills are being transacted through auctions to adjust government borrowings from the banking system. The T-bills have 91-day, 182-day and 364-day maturity periods.
Furthermore, five government bonds with tenures of two, five, 10, 15 and 20 years respectively are traded on the money market.
BBN/SSR/AD