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The government’s borrowing from the Bangladesh Bank increased to Tk 64,589 crore on September 8, 2022 compared with that of Tk 23,749 crore on the same day of the past year due to liquidity pressure in the banking sector.
According to a Bangladesh Bank data, government’s borrowing from central bank was Tk 55,866.4 crore at the end of June, 2022 against that of Tk 24,542.14 crore on June 30, 2021.
Therefore, the government’s borrowing from the BB soared by Tk 8,722.6 crore in the last two months and eight days.
Of the total amount, the government took Tk 21,237.16 crore from issuing treasury bills and Tk 46,418 crore from treasury bonds as per data on September 8.
The government’s total outstanding borrowing from scheduled banks stood at Tk 2.08 lakh crore on September 8 which was Tk 2.14 lakh crore on June 30.
So, the government repaid scheduled banks while taking loans from the central bank.
Bankers said that the country’s banking sector was facing liquidity shortage due to a slow deposit growth against high lending growth and a surge in dollar purchase from the central bank to meet the foreign currency crisis.
So, the government might choose the central bank for financing its expenditures to increase liquidity in the banking sector, they said.
The net outstanding position of the government’s borrowing from the banking sector, including the BB, reached Tk 2.73 lakh crore on September 8, 2022 from Tk 2.70 lakh crore in June, 2022. The amount was Tk 2.02 lakh crore on June 30, 2021.
To finance the budget, the government borrows mainly from two domestic sources — banking system and other non-banking domestic sources.
Government borrowing from the banking system consists of borrowing from the central bank and scheduled banks.
From banking system, government borrows mainly through advances, overdraft and issuance of treasury bills and bonds.
However, balances of government deposits and other funds are net out from the banking system borrowing.
On the other hand, government borrowing from non-banking domestic sources includes savings instruments introduced by the Department of National Savings and government T-bills and bonds held by non-bank financial institutions, insurance companies and individual investors.
The government’s borrowing from the central bank usually puts pressure on inflation.
BB in its latest report on government’s domestic borrowing said that due to enhanced borrowing of the government, yield curve of treasury bills and bonds had already largely shifted upward which might also create an upward pressure on banks’ lending rates and influence in triggering inflation in the coming months which were not desirable for the macroeconomic stability viewpoint.
‘So, the government needs to emphasise setting a priority on spending in such a way so that supply of essential commodities can sufficiently be increased in the short-run while expenditures on longer term maturity projects can be contained,’ it said.
During July to September 15, the BB sold $2.95 billion to banks to address dollar shortage in the financial sector which on the other hand mopped up equivalent local currency from the banking system.
The government’s borrowing from the banking sector was only Tk 3,4478.29 crore in FY21 that doubled to Tk 72,750 crore in FY22.
For FY22, the government targeted to borrow Tk 76,452 crore from the banking sector.
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