Govt to borrow additional Tk 5,000cr through special auction

The government will borrow an additional Tk 5,000 crore this month through a special auction, taking total borrowing via special auctions to Tk 10,000 crore. The Bangladesh Bank will hold this special auction of 91-day Treasury bills on April 8.

A senior official of the central bank confirmed that the borrowing from the banking sector is being undertaken due to increased government funding needs. Revenue collection is falling short of targets, while expenditure requirements for various programmes have risen. As a result, the banking sector has become the government’s main source of funds.

Currently, liquidity in the banking sector is high. At the end of last month, banks placed nearly Tk 11,500 crore in the Standing Deposit Facility (reverse repo). This gives the central bank confidence that it can raise additional funds from the market at this time.

Since the beginning of this year, Bangladesh Bank has also been purchasing dollars from commercial banks through auctions, further increasing the amount of taka in the banking system.

Regular Treasury bill auctions are generally held on Sundays each week. Organising a special auction outside this schedule indicates an urgent need for funds. The increased demand for government funds is also linked to the implementation of social programmes, including the Family Card scheme.

According to Bangladesh Bank, from April to June, the government plans to raise a total of Tk 1,10,000 crore in short-term borrowing through Treasury bills. Of this, Tk 44,000 crore will come from 91-day bills, Tk 36,000 crore from 182-day bills, and Tk 30,000 crore from 364-day bills. In addition, the government plans to raise another Tk 39,000 crore through medium- and long-term Treasury bonds.

Officials from the central bank’s data management department noted that this auction schedule has been set based on the government’s borrowing requirements. However, not all borrowing through Treasury bills and bonds represents net new debt, as previously issued bills and bonds will be renewed upon maturity through new auctions.

Currently, credit growth in the private sector has fallen to 6.03%. Due to weak investment demand, businesses are taking fewer new loans, creating surplus liquidity in banks. In this situation, banks are reportedly increasing investment in Treasury bills and bonds as a fully secure option.