A file photo shows a man counting bundles of taka notes in Dhaka. The government’s borrowing from the banking sector in two months of the current fiscal year was Tk 7,519 crore. — New Age photo

The government’s borrowing from the banking sector in two months of the current fiscal year was Tk 7,519 crore.

A Bangladesh Bank official said that the government’s borrowing from the banking sector was not that significant due to a slow annual development programme spending.

As per a BB report, the government repaid Tk 8,191.27 crore to the BB but borrowed Tk 15,710.86 crore from scheduled banks against Bangladesh government treasury bonds and bills.

Besides, the high sales of national savings certificates are also providing the government the required financial support to meet its current needs, they said.

However, the situation would not change much until or unless the government’s spending for ADP implementation increases.

If the Covid situation improves significantly, the government spending would increase in the coming months.

A BB data showed that the government’s outstanding borrowing from the BB dropped to Tk 16,152.27 crore on August 31 from Tk 24,343.54 crore at the beginning of FY22.

On the other hand, the government’s outstanding borrowing from the banking sector against treasury bills and bonds reached Tk 1,93,283.81 crore from Tk 1,77,195.35 crore at the beginning of FY22.

The government’s borrowing from the banking sector was only Tk 34,478.29 crore in FY21 against its initial budgetary target to borrow Tk 84,980 crore from the sector.

In FY21, the government’s borrowing from the scheduled banks increased by Tk 41,602 crore against a decline of Tk 7,124.06 crore of its borrowing from the central bank.

For FY22, the government targeted to borrow Tk 76,452 crore from the banking sector.

Apart from slow annual development programme spending, high sales of NSCs were a major reason for the government’s low bank borrowing in FY21.

In FY21, the government received Tk 41,960 crore from NSCs sales against its initial borrowing target of Tk 20,000 crore.

As a result, the sales of NSCs in FY22 is expected to remain high if the existing yield rate against the NSCs remain high at around 11 per cent against an existing interest rate of around 5 per cent in banks.

Repayment of the government debt with the BB is also helping the central bank reduce the amount of excess liquidity from the banking sector.

The central bank has so far pulled out Tk 27,215.5 crore from the banking system against BB bills as part of its measures to squeeze the amount of excess liquidity that reached Tk 2.31 crore at the end of June 2021.