Dhaka, Bangladesh (BBN) – The government will emphasize mobilization of loans and grants from overseas sources to finance budget deficit in order to reduce its growing dependence on bank borrowing.
“For the purpose of financing the deficit we are focusing on mobilizing concessional loans from the external sources as before,” Finance Minister Abul Maal Abdul Muhith said in his budget speech Thursday.
The government’s bank borrowing target declined by 21 percent to BDT 230 billion in the next fiscal year (FY), 2012-13, compared to the revised target of BDT 291.15 billion for the outgoing fiscal (2011-12), according to the proposed budget for the FY13.
Earlier, on March 27, the government revised its bank borrowing target to BDT 291.15 billion from the original target of BDT 189.57 billion for the current fiscal to meet the growing demand for its expenditures, a senior official said.
He also said higher subsidy requirements, particularly in energy, power and agriculture sectors, and lower inflow of fund from the overseas sources have forced the government to borrow more from the country’s banking system.
Both loans and grants from the overseas sources are targeted to increase by 69.48 percent and 35.51 percent respectively in the FY13 against the revised target for the outgoing fiscal.
The government is set to borrow BDT 125.40 billion as loans from the external sources in the FY13 compared to the revised target of BDT 73.99 billion for the FY12. 
Besides, foreign grants are expected to the amount of BDT 60.44 billion in the FY13 from the revised target of BDT 44.60 billion in the FY12.
A total of BDT 334.84 billion will be financed from the domestic sources, including banks and non-banking sectors to meet the budget deficit in the FY13.
Under the proposed budget, the overall budget deficit will be BDT 520.68 billion in the FY13, which is 5.0 per cent of the gross domestic product (GDP).
A total of BDT 184 billion will be borrowed through issuing long-term Bangladesh Government Treasury Bonds (BGTB), while the remaining BDT 46 billion through treasury bills (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. 
On the other hand, four government bonds having the tenures of 5-year, 10-year, 15-year and 20-year are being traded in the market. 
The government is also set to borrow BDT 104.84 billion from non-banking sector through issuing national savings certificates to finance the budget deficit in the FY13.
BBN/SSR/AD-07June12-10:31 pm (BST)