Govt borrowing limit from BB doubled

Express (August 1, 2011)

The limit of the government's short-term borrowing from the central bank has been raised to double the earlier one -- from Tk 10 billion to Tk 20 billion now -- for avoiding any mismatch in cash management by the government.

The extended limit was put into effect from July 1, the first day of the new fiscal year (FY) 2011-12, officials said Sunday.

The decision has been taken at a meeting of the cash and debt management committee (CDMC) with Finance Secretary Mohammad Tareque in the chair.

Under the changed rules, the government will be able to borrow up to a maximum amount of Tk 20 billion from the central bank of Bangladesh without issuing any securities.

Earlier, the government could borrow Tk 10 billion at the maximum as short-term loan from the Bangladesh Bank (BB) under the head -- ways and means advances (WMAs) -- to meet its day-to-day expenditures.

"We've doubled the ceiling of WMA to mange the government's cash management properly," a senior government official, who is familiar with public borrowings from the banking sector, told the FE.

He also said the high-powered CDMC has taken the latest decision, against the backdrop of difference between receipts and payments of the government that had exceeded Tk 20 billion in several working days in FY11.

"We expect the new limit of WMAs will help to mitigate the problem of mismatch in day-to-day transactions of the government," the official said, adding that the central bank is already maintaining the new ceiling of WMAs.

"The new limit of WMAs has been set, considering the size of budget as well as the country's growing economic activities," he said, adding that the new WMA ceiling will help to decrease the government's overdraft (OD) drawing from the central bank to meet its regular expenditure.

The government has projected its aggregate borrowings from the country's commercial banks and financial institutions through issuing of T-bills and bonds at Taka 189.57 billion in FY12.

However, the government will continue to maintain its long-term debt management strategy for FY12, aiming to speed up its development activities across the country.

As part of the strategy, the government has decided to borrow Tk 178.78 billion from the banking system by issuing bonds, while Tk 10.79 billion will be borrowed through auctions of three categories of treasury bills (T-bills).

Currently, three T-bills are being transacted through auctions to adjust the government's borrowings from the banking system.

The T-bills have 91-day, 182-day and 364-day maturity periods.

On the other hand, four government bonds -- five-year, 10-year, 15-year and 20-year -- are being traded in the markets.