Dhaka, Bangladesh (BBN) - The Bangladesh government prefers short-term borrowing over long-term options to meet its budget deficit partly.
As part of this strategy, the Ministry of Finance has resumed the auction of 14-day Treasury Bills (T-bills) in its July–September auction calendar, after a hiatus of nearly one and a half years, to manage funds more efficiently.
On Wednesday, the government borrowed BDT 50 billion through the issuance of the short-term T-bills to help cover its fiscal shortfall, according to the auction results.
The cut-off yield, commonly known as the interest rate, on the 14-day T-bills rose to 12.00 per cent on the day, up from 10.15 per cent in the previous auction held on December 10, 2023.
The government prefers short-term rather than long-term borrowing from the banking system to manage its funds efficiently, the Bangladesh Bank (BB) officials said while explaining the main objective behind the resumption of the 14-day T-bill auctions.
This move is expected to help ease the government's debt-servicing burden, they explained.
The next auction of 14-day T-bills is scheduled for 16 July, with plans to raise BDT 50 billion under the same arrangement.
The 14-day T-bills were initially introduced on 16 November 2016 to facilitate more efficient government cash management.
Market operators, however, have urged the government to utilize the 14-day T-bills on a regular basis, saying it would contribute to market development and open up a new avenue for short-term investments by commercial banks.
"The government normally uses short-term T-bills as and when required," said the head of treasury at a leading private commercial bank (PCB), adding that the auction of 14-day T-bills should continue.
Currently, four types of T-bills are transacted through auctions to adjust government borrowings from the banking system. These T-bills have maturities of 14 days, 91 days, 182 days, and 364 days.
T-bills are short-term investment instruments issued through auctions conducted by the central bank on behalf of the government.
In addition, five government bonds-tenured for two, five, 10, 15, and 20 years-are also traded on the market.
BBN/SSR/AD