The government is set to make a net borrowing of more than Tk 45 billion from the country's banking system in December to partly meet its budget deficit, officials said.
The government's gross borrowing may reach up to Tk 215 billion from the banking system in December. It is expected to issue treasury bills (T-bills) and bonds, according to the auction calendar, issued by the Bangladesh Bank (BB) recently.
The amount is the highest during the first half of this fiscal.
The auction calendar includes the schedule and amount of T-bills and bonds, to be issued through auction for raising funds from the market to partly meet the government's budget deficit.
Thus, the government's net bank borrowing may reach Tk 45.55 billion in a single month (December), after deducting Tk 169.45 billion against the government securities that would be mature in the month, according to the officials.
"The government faced deficit balance in its account recently, mainly due to lower revenue collection along with the ongoing falling trend in sales of national savings certificates," said a senior official, familiar with the debt-management activities.
The government's account deficit stood at Tk 59 billion as on November 28 that was mitigated by using ways and means advances (WMAs) facility from the central bank, he told the FE on Monday.
Under the existing rules, the government is empowered to borrow up to a maximum amount of Tk 60 billion from the BB using WMAs facility without issuing any securities.
"The government may avail overdraft (OD) drawing facility from the central bank, if its account negative balance crosses Tk 60 billion-mark," the official added.
Meanwhile, the government's net bank borrowing stood at Tk 426.07 billion, which was around 90 per cent of the total target, as of November 21 of FY 2019-20, according to the BB's confidential report.
Of the total, the government borrowed Tk 380.65 billion from the scheduled banks by using T-bills and bonds, and the remaining Tk 45.42 billion from the central bank.
Meanwhile, a meeting of the Cash and Debt Management Committee (CDMC) is scheduled to be held today (Tuesday) in the Ministry of Finance (MoF) to review the government's overall borrowing from the banking system, another official said.
"The government's future bank borrowing trend may be fixed in the high-level meeting."
He also said the government's higher bank borrowing may continue, if the revenue collection fails to achieve the target.
Market operators, however, said liquidity pressure on the market may intensify in near future, if the government's higher bank borrowing continues.
Besides, the central bank's continuous selling of the US dollar to the commercial banks to help set their import payment obligations may push up liquidity pressure on the market in the coming months, they added.
They also urged the BB to devolve major portion of the borrowed amount on its own accounts to avert liquidity pressure on the money market in near future.
"The government's higher bank borrowing along with the BB's selling of the US dollar to the banks has created a double effect in the market," a senior executive of a leading private commercial bank told the FE.
The BB has so far sold US$ 299 million to the banks, particularly the public sector ones, during the current fiscal year (FY), 2019-20, to meet the growing demand for the greenback in the market.
In FY 19, the BB sold $2.34 billion to the banks on the same ground, according to the central bank data.
The government has already targeted higher borrowing from the banking system to partly finance the budget deficit in FY 20.
Its bank borrowing is set to be Tk 473.64 billion in FY 20, up from Tk 308.95 billion in the previous year, according to the budget documents.
Under the arrangement, the government will borrow Tk 280.94 billion by issuing long-term bonds, while the remaining Tk 192.70 billion will come from T-bills.
Currently, four T-bills are being transacted through auctions to adjust the government's borrowings 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-year, five-year, 10-year, 15-year and 20-year are traded on the market.