The government is set to reduce borrowing from the country's banking system for September, compared to the current month, to meet the budget deficit partly.
The ministry of finance has set the bank borrowing target at over Tk 23 billion for September, according to the auction calendar issued by the Bangladesh Bank (BB) on Thursday.
According to the calendar, the government may take up to Tk 174 billion as gross borrowing from the banking system in the next month by issuing treasury bills (T-bills) and bonds.
The auction calendar means the schedule and the amount of T-bills and bonds to be issued through auction for raising funds from the market to meet the government budget deficit partly.
The government's net bank borrowing is set to reach Tk 23.40 billion by the end of September, after deducting Tk 150.50 billion as maturity amount of the government securities from the gross borrowing amount, the central bank officials added.
The government's net bank borrowing was Tk 48.50 billion in August of this calendar year, according to the officials.
They said the higher profit of the central bank has helped the government cut down on the bank borrowing for September.
The BB has already deposited its profit worth Tk 43.16 billion for the fiscal year (FY) 2018-19 with the government account, they added.
The central bank's such profit in the FY '18 was Tk 7.92 billion, the officials said.
The BB has earned the higher profit mainly due to its prudential foreign exchange reserve management, a BB official told the FE.
"Our 90-plus per cent earnings came from the foreign exchange reserve investment in different securities in the global market in the FY '19," the BB executive director explained.
Meanwhile, the government's aggregate net bank borrowing stood at Tk 262.48 billion as of August 20 of this fiscal year mainly due to adjustment to higher expenditure for June of the FY '19.
Usually, the adjustment to previous fiscal year's expenditure is allowed in the first half of July of the next fiscal year, the BB officials said.
Besides, the downtrend in sales of national savings certificates in the recent months has contributed to higher bank borrowing by the government.
The net sales of national savings instruments came down to Tk 32.08 billion in June from Tk 32.58 billion in the previous month of 2019, according to official figures.
The government had already targeted higher borrowing from the banking system to finance the budget deficit partly for the FY '20.
Its bank borrowing is set to be Tk 473.64 billion for the FY '20, up from Tk 308.95 billion in the previous year, according to the budget documents.
"The government's bank borrowing may exceed the target by the end of this fiscal if the decreasing trend in sales of the national savings instruments continues," a senior official familiar with the government debt-management activities hinted.
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 tenure of two-, five-, 10-, 15- and 20-year are traded on the market.