Research Department Bangladesh Bank

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1 Monthly Report On Government Borrowing from Domestic Sources 1 July-June, FY'17 Research Department Bangladesh Bank 1 The report has been prepared by Money and Banking Division, Research Department, Bangladesh Bank (the Central Bank of Bangladesh). Comments are welcome to mohammad.abdul@bb.org.bd.

2 Government Borrowing from Domestic Sources during July-June of FY'17 The government borrows from two domestic sources: banking system through Treasury Bills (T-Bills) & Bond and the non-banking system mainly through National Savings Directorate (NSD). Govt. borrowing from banking sector decreased in FY 17. Instrument-wise govt. domestic borrowing (net) during July-June, FY'17 is depicted in Figure-1. Figure-1: Instrument-wise Govt. Domestic Borrowing (Net) during July-June, FY'17 Ways and Means Adv. Overdraft Overdraft Block Govt. Currency Liabilities Treasury Bills Treasury Bonds Special T. Bonds Balances of GIIB Fund NSD Instruments Adv. to Food Ministry Adv to Other Min,Auto&Semi-Auto Accrued Interest Govt. Deposits (-) Other securities , -12, -8, -4, 4, 8, 12, 16, 2, Taka in Crore 24, 28, 32, 36, 4, 44, 48, 52, 56, Source: Debt Management Department, Statistics Department, Bangladesh Bank, National Savings Directorate, June 217 Govt. domestic borrowing (net) stood at Tk crore in FY'17 after the adjustments with T-Bills and Bonds, NSD, Ways and Means Advances (WMA), advances to Food Ministry and other Ministries, Overdraft (OD) current and block accounts, accrued interest, and advances and deposits of autonomous and semi-autonomous bodies, balances of GIIB (Government Islamic Investment Bond) fund as well as deduction of cash balance in the form of govt. deposits with Bangladesh Bank and scheduled banks (i.e. including banking and nonbanking sources). It may be noted that the amount was Tk crore and Tk crore during July-May of FY 17 and July-June of FY 16 respectively. The govt. domestic borrowing (net) during July-June, FY'17 is 4.7 percent lower than that of the same period of the previous year. It may be mentioned that Govt. borrowed Tk crore through NSD instruments in FY 17. It is observed that govt. deposits increased by Tk crore (net) with the banking system during this period. Deposits with Bangladesh Bank (BB) decreased by Tk crore and deposits with scheduled banks (SBs) increased by Tk crore.

3 From Figure-2, it is observed that the net borrowing from banking system is positive for the month of July, FY 17. After that, the govt. borrowed successively less than the amount of repayment and holding cash balances through banking system up-to July-June, FY 17. Figure-2: Movements in Government Domestic Borrowing during July- June, FY'17 6, 5, 4, 3, 2, 1, -1, -2, -3, -4, Taka in crore July Jul-Aug Jul-Sept Jul-Oct Jul-Nov BB SBs Non-Bank Total Source: Debt Management Department and Statistics Department of Bangladesh Bank, National Savings Directorate, June 217. Jul-Dec Jul-Jan Jul-Feb Jul-Mar Jul-Apr Jul-May Jul-June Govt. borrowing from the banking system decreased by Tk crore during July-June of FY'17. On the other hand, total non-bank govt. borrowing (net) stood at Tk crore during the period. As a result, govt. borrowing (net) from the domestic sources during July-June of FY'17 stood at Tk crore. The movement in net govt. borrowing from different domestic sources during July-June of FY'17 is demonstrated in Figure-2. Figure-3: Monthly Trends in Government Domestic Borrowing during July-June of FY'17 Taka in crore 3, 25, 2, 15, 1, 5, -5, -1, -15, Jul-16 Aug-16 Sep-16 Oct-16 Source: Debt Management Department and Statistics Department of Bangladesh Bank, National Savings Directorate, June 217. Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 BB SBs Non-Bank Total May-17 Jun-17 Figure-3 shows the monthly movement of government s net domestic borrowing during July-June of FY 17. The net borrowing sharply increased by TK crore (borrowed TK crore from SBs, TK crore from BB & TK crore from non-bank respectively) in June, 17. Govt. borrowing increased by TK crore in May, 17.

4 In the budget of FY'17, Tk crore has been fixed for borrowing from domestic sources by the government of which Tk crore and Tk crore have been targeted to borrow from banking and non-banking sources respectively. During July-June of FY'17, the net repayment and holding of cash balances with Bangladesh Bank stood at Tk crore. On the other hand, the net repayment and holding of cash balances with scheduled banks stood at Tk crore during the same period. Figure-4: Budget Target and Net Govt. Domestic Borrowing during July-June of FY'17 Bangladesh Bank Scheduled Banks Actual (Banking System) Target (Banking System) Actual (Non-Bank) Target (Non-bank) Actual (Total) Target (Total)) , -24, -16, -8, Source: Debt Management Department and Statistics Department of Bangladesh Bank, National Savings Directorate, June , 16, Taka in Crore 24, 32, 4, 48, 56, 64, A comparative picture of government total budget target and actual domestic borrowing situation during July-June of FY'17 is shown in Figure-4. During the period, govt. repaid (net) Tk crore through T-Bills and Bonds from the banking system. However, government total borrowing from other than banks (including NSD, T-Bills and Bonds) stood at Tk crore. Government borrowed Tk crore through NSD instruments during the period. The total net government domestic borrowings (banking and non-banking sources) stood at Tk crore during July-June of FY'17 which is 57.3 percent of total budget target.

5 Major Changes/Findings of the Govt. Borrowings from Domestic Sources: Total Govt. domestic borrowings (net) from banking system decreased by Tk billion in FY'17. Govt. borrowed Tk billion (of which Tk billion through NSD instruments) from other than banks in FY'17, which exceeded the total budget target from non-banking sources. As the interest rate of NSD certificate is significantly higher than any other interest rate prevailing in the domestic market, Govt. borrowing is increasing much through NSD certificate.

6 Table I : Government Borrowing Position from the Banking System during July-June of FY17 Sl. Particulars Issue and Maturity Objectives Outstanding as on Outstanding as on Outstanding as on Change (+) / (-) No. date 3 June May 17 3 June 17 June 17 July-June =(7-6) 9=(7-5) A. Bangladesh Bank 1. Ways and Means Advances To increase Government cash balance Overdraft Overdraft Block Devolvement a) Treasury Bills b) Treasury Bonds Government Currency Liabilities Advances to Autonomous and Semi-autonomous Bodies Accured Interest Government (-) BB's Balances of GIIB Fund (-) A. Total : ( )* B. Deposit Money Banks (DMBs) 1. Government Treasury Bills i) Treasury Bills (Less than 1 year) To increase Government cash balance Bangladesh Govt. Treasury Bonds (BGTB) i) 2-years Bangladesh Govt.Treasury Bonds To increase long-term ii) 5-years Bangladesh Govt.Treasury Bonds investment of different iii) 1-years Bangladesh Govt.Treasury Bonds banks, non-bank financial iv) 15-years Bangladesh Govt.Treasury Bonds institutions and employees v) 2-years Bangladesh Govt.Treasury Bonds GF of different companies Annex-1 (Provisional) (Taka in crore) 3. Others Treasury Bonds a) 5 Years and above (Specialized Bonds) Issued 16 Jan-211 and 6, 7 &1-years (BJMC&BTMC) interest free To repay the loan of BJMC i) Treasury Bond-216, 217 &22 8/ maturity date 16 January & BTMC 217, 18 & 21 respectively years (Jute)Treasury Bond-218 bearing 5. ii) percent interest 7/ 25-years (Jute) Treasury Bond-219 bearing 5. iii) percent interest 4/ 25-years (Jute) Treasury Bond-22 bearing 5. Issued iv) 1/ 2/ percent interest 1-years to 15-years (BPC) Treasury Bond bearing v) 5. percent interest 5-years and 6-years (BPC) Treasury Bond bearing vi) 7. percent interest 5/ 5-years to 13-years BJMC Treasury Bond bearing vii) 5. percent interest 6/ viii) 7-years SPTB-22 bearing 7. percent interest Issued 1 Nov-1993 and maturity date 1Nov-218 Issued 3 Jun-1994 and maturity date 3 Jun Jul-1995 and maturity date 1Jul-22 Issued 25 Sep-27 and Maturity date from 25 Sep- 214 to 25 Sep-222 Issued 5 Oct 211 and 26 Dec 211 and Maturity date 5 Oct-216 and 26 Issued 23 Oct-211 and maturity date 23 October 216, 2, 22 & 24 respectively Issued 29 June-213 and To compensate for the liquidation of jute sector credit To compensate for the liquidation of jute sector credit To reimburse one-third of the debt due to jute mills' loan write-off by the private banks. To repay the loan of Bangladesh Petroleum Corporation To repay the loan of Bangladesh Petroleum Corporation To repay the loan of BJMC maturity date 29 June-22 ix) 8-years SPTB-221 bearing 7. percent interest Issued 29 June-213 and To increase Government maturity date 29 June-221 cash balance x) 1-years SPTB-223 bearing 7. percent interest Issued 29 June-213 and maturity date 29 June Sub-Total : (1+2+3) Prize Bond/Income Tax Bond Government's other Securities Advances to Food Ministry Advances to Other Ministries Advances to Auto./Semi-Autonomous Bodies Accrued Interest Deposits of Ministries and Departments (-) Deposits of Auto./Semi-Autonomous Bodies (-) SBs's Balances of GIIB Fund (i+ii) i) Investment to GIIB Fund ii) Borrowing from GIIB Fund (-) B. Total : (4+ +13) Grand Total : (A+B)* ,45. Including other deposits. 1/ 2 year Bangladesh Government Treasury Bond was introduced in May 213 2/ An amount of Tk. 2.7 crore was paid in July 216 against the outstanding of Tk crore in June 216 3/ *Including GIIB Fund 4/ An amount of Tk crore was paid in June 217 against the outstanding of Tk crore in June 216 5/ An amount of Tk crore was paid upto December 216 against the outstanding of Tk. 21 crore in June 216 6/ An amount of Tk crore was paid in October 216 against the outstanding of Tk crore in June 216 7/ An amount of Tk crore was paid in November 216 against the outstanding of Tk crore in June 216 8/ An amount of Tk crore was paid in January 217 against the outstanding of Tk crore in June 216 Source: Debt Management Department, Statistics Department, Bangaldesh Bank ( Figures of Treasury Bills and Bonds (Including Special Bonds) are collected from DMD).

7 Table-II: Government Borrowing (Net) from Other than Banks during July-June of FY17 Annex-2 (Taka in Crore) July-June 216 July-June 217 Sl. Particulars Sale Repayment Net Sale Repayment Net No. Principal Interest Sale Principal Interest Sale = (3-4) = (7-8) NSD Instruments 1. Defence Savings Certificate year Bangladesh Savings Certificate year Savings Certificate Bonus Savings Certificate month interest bearing Savings Certificate Family Savings Certificate month interest bearing Savings Certificate Jamanat Savings Certificate Pensioner Savings Certificate Post Office Savings Bank a) General Account b) Fixed Account c) Bonus Account Postal Life Insurance Prize Bond Wage Earners' Development Bond year National Investment Bond US $ Premium Bond US $ Investment Bond Total : ( ) Outstandings as on Net Outstandings as on Net June 216 Changes June 217 Changes 18. Govt. Treasury Bills/Bonds i) Government Treasury Bills ii) Bangladesh Govt. Treasury Bonds (BGTBs) a) 2-year Bangladesh Government Treasury Bonds b) 5-year Bangladesh Government Treasury Bonds c) 1-year Bangladesh Government Treasury Bonds d) 15-year Bangladesh Government Treasury Bonds e) 2-year Bangladesh Government Treasury Bonds Total Non-bank Government Borrowing (net) : (17+18) Sources : National Savings Directorate, Debt Management Department, BB.