Dhaka, Bangladesh (BBN)– The Bangladesh government borrowing from the banking system more than doubled in the fiscal year (FY) 2018-19 to finance its budget deficit partly, officials said.

It’s borrowing from the banking system rose to BDT 264.46 billion as on June 30 last from BDT 117.31 billion in the same period of the FY ’18, according to the Bangladesh Bank (BB)’s confidential report.

The bank borrowing of the government, however, was lower than both original and revised targets for FY 2018-19, they added.

The government had slashed its bank borrowing target to BDT 308.95 billion for the FY ‘19 from the original target at BDT 420.29 billion, the budget documents showed

The officials said higher revenue shortfall has forced the government to borrow more from the banking system to meet the budget deficit particularly for implementation of mega projects.

The National Board of Revenue (NBR) had faced BDT 660 billion shortfall against its revised target for the outgoing fiscal year, according to the provisional figures.

Talking to the BBN, a senior official familiar with the government debt management activities said major portion of fund was borrowed by the government during the last two months of FY ’19 for making payments to the contractors for implementation of different development projects.

Faster execution of the Annual Development Programme (ADP) during the May-June period of the FY ’19 has also pushed up the government’s bank borrowing, the official explained.

Normally, the implementation rate of ADP gathers up pace during the last two months of each fiscal year.
Besides, decreasing trend in sales of national savings certificates in the month of May has also contributed to push up the bank borrowing of the government, he added.

Net sales of national savings instruments fell by 1.33 per cent to BDT 32.58 billion in May 2019 from over BDT 33 billion in the same month of 2018, the official figures showed.

The government had availed of ways and means advances (WMAs) around BDT 10 billion to finance the budget deficit in the FY ’19, a BB senior official told the BBN in Dhaka.

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

Besides, the government is entitled to borrow a maximum of BDT 40 billion through overdraft (OD) drawing facility from the central bank on the same ground.

“But the government did not avail OD facility from the BB until June 30,” the official explained.

Quoting budget documents, the central banker said the rising trend of the government bank borrowing may continue in the ongoing fiscal year.

The government has already targeted higher borrowing from the banking system to finance budget deficit partly for the ongoing FY ’20.

It’s bank borrowing is set to be BDT 473.64 billion for the FY 20 from BDT 308.95 billion in the previous year, according to the budget documents.

Under the arrangement, the government will borrow BDT 280.94 billion issuing long-term bonds while the remaining BDT 192.70 billion through treasury bills (T-bills).

Currently, four treasury bills (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.

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