Polls prod govt to borrow more from banks

Net borrowing on track to hit Tk 10.42b in Nov

The government is set to boost its bank borrowing significantly in November mainly due to the upcoming general elections, officials have said. The net borrowing from the banking system is on track to reach Tk 10.42 billion by the end of this month after deducting Tk 21.58 billion in matured government securities from the gross borrowing, they said.

It may borrow up to Tk 32 billion as gross borrowing from the banking system this month by issuing treasury bills (T-bills) and bonds to finance its budget deficit, according to the auction calendar of the Bangladesh Bank (BB) released recently.

The government will have to pay Tk 21.58 billion out of Tk 32 billion against the maturity of its securities in November, the officials said.

On the other hand, the government injected Tk 29.50 billion into the market by repaying more than borrowing in the month of October, they added. The government's overall net bank borrowing was Tk 61.82 billion as on November 08 last, according to the BB's confidential report.

"The government bank borrowing may increase further in December ahead of the elections," a senior official familiar with the government debt-management activities told the FE on Sunday. The 11th national election is scheduled to be held on December 30.

The official also said the Ministry of Finance is now following 'near to zero' cash management strategy to minimise the government's debt servicing burden.

Talking to the FE, a senior Bangladesh Bank (BB) official said the government is now in a borrowing spree to meet extra expenses ahead of the next national polls.

As part of the move, the government has already almost used ways and means advances (WMAs) from the central bank to meet its budgetary expenses.

The government authorities are now empowered to borrow up to Tk 40 billion from the central bank under the advances to meet its day-to-day expenditures without issuing any securities.

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

"But the government has not availed such a facility from the BB yet," the central banker added.

The official also said that the government had been forced to borrow more from the banking system as revenue collection during the first quarter (Q1) of the current fiscal year (FY) 2018-19 was lower.

The National Board of Revenue (NBR) had faced a Tk 110 billion shortfall against its target in the July-September period of the FY'19, prompting the government even to curtail allocations for the development projects.

The release of funds against public sector projects remained poor in the first two months of the fiscal year because tax collection has not increased as expected in the July-September period, Md Mosharraf Hossain Bhuiyan, chairman of the NBR, said recently.

The Ministry of Finance had set a bank-borrowing target of Tk 420.29 billion for the FY 19 to finance the budget deficit. Under the proposed bank borrowing, the government will borrow Tk 239.65 billion issuing long-term bonds while the remaining Tk 180.64 billion through T-bills.

Currently, four T-bills are being transacted through auctions to adjust the government's borrowing from the banking system. The T-bills have 14-day, 91-day, 182-day and 364-day maturity periods.

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

• Courtesy: The Financial Express/ Nov 19, 2018