Rising Bank borrowing signals growing fiscal pressures

The government raised Tk 50 billion in a single day through a special auction of short-term treasury bills on Wednesday, highlighting an increasing reliance on bank borrowing to finance its budget deficit. Officials said the move comes amid rising fiscal pressures, influenced by global uncertainties and geopolitical tensions.

The yield on the T-bills rose to 9.88% during the auction, up from 9.78% in earlier auctions. “The yield on the T-bills increased due to the special auction,” a senior treasury official at a leading private commercial bank told Media.

He added that government borrowing from the banking system is expected to rise gradually in the final quarter of the current fiscal year (FY 2025-26) amid ongoing geopolitical tensions. “The ongoing Middle East conflict has created additional pressure on the government’s budgetary expenditures,” the official explained.

Another senior official involved in government debt management said the additional borrowing aimed to meet budgetary expenses at a relatively lower yield. He noted that the T-bill yield remains below the Bangladesh Bank’s policy (repo) rate of 10%.

Currently, the government conducts auctions for four types of T-bills with maturities of 14 days, 91 days, 182 days, and 364 days to manage bank borrowings.

In addition, five government bonds with tenures of 2, 5, 10, 15, and 20 years are also traded in the market.