In the fiscal 2019-2020, the government borrowed almost the entire amount from banks against its revised target set for the fiscal year to meet the budget deficit.
Although the bank borrowing target in the budget announced for FY20 was set at Tk47,364 crore, the amount almost doubled to Tk82,421 crore in the revised budget.
At the end of the fiscal year, the government borrowed 97.35% or Tk80,238 crore of the target, according to the Bangladesh Government Securities Report for FY20 released by the central bank on Tuesday.
The government borrows from banks through treasury bills and bonds.
In the first four months of the current fiscal year from July to October, the government's bank borrowing stood at only Tk1,063 crore, down from Tk36,000 crore in the same period of the last fiscal year, with no pressure of expenses owing to Covid-19.
The central bank report highlighted various aspects of government securities, money market and bond market in the last fiscal year.
Regarding the development of the bond market, the Bangladesh Bank is working with government departments and private partners, including the Bangladesh Securities and Exchange Commission, keeping the Comprehensive Framework on the Development of the Bond Market in Bangladesh at the forefront, the report said.
Recently, the government has introduced Shariah-compliant bonds, commonly known as sukuk, to raise Tk8,000 crore to implement a safe water supply project.
In the first auction held on 28 December to invite investment in the Tk4000 crore fund, banks and individuals placed 39 bids worth over Tk15,000 crore.
Regarding government securities, various steps have been taken to attract general investors.
For the awareness of general investors, the Bangladesh Bank has currently started to advertise the investment process in Government Securities (G-Sec) in national daily newspapers.
Additionally, to meet the demands of the broadened base of investors, the Debt Management Department directed banks and financial institutions to open separate G-Sec trading windows to provide full-fledged cliental services.
On the other hand, to combat the pandemic effects, in March 2020, the Bangladesh Bank offered the banks and financial institutions the opportunity to sell their Government Securities holding (in excess of SLR) to the central bank.
The report said amidst the Covid-19 pandemic, the money market in Bangladesh experienced mild liquidity pressure, especially in the latter half of FY20.
Similar borrowing pressure was visible in the interbank repo and call money market as both the call money market and the IB repo market play significant roles in day-to-day liquidity management of the banking sector.