Interest rates on all maturities of Bangladesh’s Treasury bills (T-bills) have once again surpassed 10%, driven by increased government borrowing and a liquidity shortage in the banking sector.

On Sunday, yields on 91-day, 182-day, and 364-day Treasury bills rose by 5 to 55 basis points. The rate for the 91-day bill reached 10.08%, the 182-day bill 10.30%, and the 364-day bill 10.04%. Just two weeks earlier, the rates stood at 9.52%, 9.97%, and 9.99%, respectively.

According to economists, bankers, and senior officials of the Bangladesh Bank, the rise in T-bill yields is mainly due to two factors: higher government borrowing and tighter liquidity in the banking system.

First, the government has ramped up borrowing through Treasury bills and bonds for the September–December quarter due to a cash shortfall. Banking officials estimate that the government will borrow a net additional Tk 22,000 crore this quarter, raising demand and pushing interest rates higher as supply lags behind.

Second, the market is facing a liquidity crunch. The Bangladesh Bank has recently halted its dollar purchases through auctions, which had previously injected local currency into the market. With that supply now absent — and deposit growth in the banking sector remaining sluggish — liquidity has tightened further.

Economists point out that slower revenue collection and rising government expenditure have deepened the fiscal deficit, compelling the government to rely more heavily on borrowing.

Dr. Zahid Hussain, former lead economist at the World Bank’s Dhaka office, explained:

“There are two main reasons why Treasury bill rates rise — when the government increases borrowing and when market liquidity declines. Revenue collection was strong early in the fiscal year, but it has recently slowed down.”

Syed Mahbubur Rahman, Managing Director and CEO of Mutual Trust Bank, added:

“The government has increased borrowing through Treasury bills and bonds. Since private sector credit growth is low, banks are more interested in investing in government securities because they are fully secure and offer attractive returns.”

He further noted that Bangladesh Bank’s decision to stop buying U.S. dollars has tightened liquidity, while the government’s fund shortage has intensified borrowing needs.

“The IMF has indicated that the remaining tranche of funds will be disbursed after the formation of the new government. Until then, the government is relying more on Treasury bills and bonds to meet its immediate financing needs,” he said.

Financial analysts say the trend signals rising pressure on the domestic money market and could lead to higher borrowing costs across the economy if liquidity conditions do not improve soon.