The government’s borrowing in July, the first month of the current fiscal year 2020-21, stood at Tk 18,056 crore that included Tk 13,087 crore it borrowed through treasury bills and bonds and Tk 4,969 crore given by the Bangladesh Bank.
The government borrowed the money to meet deficit financing and to bear its administrative expenses.
The borrowing in July against treasury bills and bonds, and from the central bank accounts for 21.25 per cent of the government’s annual borrowing target from the banking system.
The country’s banks are the major buyers of the government’s treasury bills and bonds while corporate entities, insurance companies and individuals are also eligible to buy treasury bills and bonds.
Officials of the central bank said that the government’s borrowing against treasury bills and bonds, and from the central bank had been growing since FY20 after the launch of an automated system for sales of national savings certificates.
As the scope for borrowing against NSCs was quizzed, there was no alternative for the government but to borrow through treasury bills and bonds to meet deficit financing.
In FY20, the government borrowed Tk 85,231 crore from the banking sector against treasury bills and bonds and from the central bank amid poor sales of NSCs and a huge deficit in revenue collection even though the implementation of annual development programme dropped to a record low.
The rate of ADP implementation dropped to 80.18 per cent against the revised outlay of Tk 2,01,199 crore for FY20.
For FY21, a lofty Tk 84,980 crore borrowing target has been set on the same ground and to finance different stimulus packages and social safety net programmes taken by the government amid the coronavirus outbreak in the country.
Experts, however, expressed scepticism whether the government would be able to contain its borrowing within the projection.
They also said that the increased borrowing of the government would also hinder the credit flow to the private sector.
The hindrance in credit flow to the private sector would ultimately affect resumption of the country’s economic activities thus slowing down the recovery of damages done by the outbreak of coronavirus.
In FY20, the private sector credit growth plunged to 8.61 per cent against the BB’s projection for 14.8 per cent growth.
Policy Research Institute executive director Ahsan H Mansur told New Age recently that the government’s borrowing would even exceed Tk 1 lakh crore in the FY21 as there was no alternative for the government but to borrow from the banks.
Although the government indirectly enforced 6 per cent interest rate on bank deposits, the rate of interest against treasury bills and bonds has been on the rise due to the government’s heavy borrowing by using the tools.
The government, however, is borrowing money from banks for short term, ranging from 91 days to two years, at the interest rates between 6.5 per cent and 8.5 per cent.
Offering high interest rates against treasury bills and bonds was also discouraging some banks to lend the private sector as lending the government is risk- and hassle-free.
Amid the implementation of stimulus packages worth Tk 1.03 lakh crore, the government’s borrowing from the banking system would weaken the banks’ lending capacity, economists warned.
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