Govt emptying banks before tenure ends

mka mukith

Borrows Tk 9,634cr from commercial banks in 3 months

The government has borrowed Tk 9,634.11 crore from the commercial banks in just three months of the current fiscal year keeping an eye on the next national elections, said bankers on Wednesday.
According to the latest Bangladesh Bank data, the government’s net borrowing in July-September stood at around Tk 1,713.61 crore as it borrowed heavily from the commercial banks and repaid some of its loans it had taken from the central bank earlier.
‘The government is borrowing heavily from the commercial banks as it is nearing the end of its tenure. It has also reduced borrowing from the central bank,’ said a BB official.
He said as the state-run commercial banks were facing capital shortfall, the government was borrowing heavily from the private commercial banks.
Although the banks will not face any problem in short-term as they have enough liquidity but in the next few months they might face problem as most of the loans which the government has taken through long-term treasury bonds would remain stuck for years, the official said.
BB data showed that till September 26 the government borrowed Tk 9,634.11 crore from the commercial banks and repaid the central bank Tk 7,920.50 crore.
The BB official said that the government repaid the loans to BB after the central bank deposited its profit of Tk 4,072 crore for the last financial year 2012-13 to the government.
BB data showed that till September 5, the government had a borrowing of Tk 5,998.07 crore from the commercial bank in the current fiscal year.
But, it took more than Tk 3,600 crore from the banks in over 20 days.
Managing director of a private commercial bank told New Age on Wednesday that the government had increased borrowing from the commercial banks because of its increased expenditure ahead its tenure. ‘Many of the projects of the government are at final stage, that’s why it is borrowing heavily to pay for the projects,’ he said.
He, however, said that although the banks had enough liquidity, they might face trouble in six month times, after the elections, because of the increased government borrowing through treasury bills and bonds.
Former BB governor Salehuddin Ahmed told New Age that the government expenditure on politically motivated projects had increased ahead of the end of its tenure and the next elections. ‘Besides, the government has announced dearness allowance for the public servants which will also push up the government borrowing,’ he said.
He said that such a huge borrowing from the banks would push up inflation.
‘The current business environment in the country is not expectable where private sector has become stagnant and the government is borrowing heavily,’ he said.
Another BB official said, ‘We apprehend that the government’s bank borrowing will rapidly increase in the rest of the period of its tenure as it has now given more attention to implementing those projects which will satisfy the voters ahead of the coming general elections.’
The government has set a target to take loan amounting to Tk 25,993 crore from the banking sector in FY14.
BB officials said that the auction schedule of the T-bills and bonds were set in such a way that the government could borrow heavily in the first six month of the current fiscal year.
The BB data showed that the government’s outstanding bank borrowing, which had accumulated over the years, stood at Tk 1,14,366.05 crore as of September 26, 2014.

Source: New Age

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