The government is set to intensify its short-term borrowing drive as fiscal pressures deepen, with the central bank preparing another special auction of treasury bills to meet mounting financing needs.
The Bangladesh Bank will auction Tk5,000 crore in 91-day treasury bills on 8 April, following a similar operation earlier in the month. This brings the cumulative value of special auctions in April to Tk10,000 crore, highlighting a notable acceleration in off-schedule borrowing.
Officials suggest the move reflects a combination of weaker-than-expected revenue collection and persistent expenditure demands. Government spending has remained elevated due to subsidy commitments and social protection programmes, prompting a greater dependence on domestic bank financing.
Market participants, however, point out that current liquidity conditions are favourable for such borrowing. At the end of March, banks reportedly held around Tk11,500 crore in surplus funds within the central bank’s standing deposit facility. This excess liquidity has provided ample scope for the government to raise funds without exerting upward pressure on interest rates.
Adding to this liquidity surge, the central bank has been actively purchasing US dollars from commercial banks since the start of the fiscal year. These interventions have injected additional taka into the banking system, further strengthening banks’ capacity to absorb government securities.
Evidence of fiscal urgency is also visible in earlier off-calendar borrowing. During the October–December quarter, the government raised approximately Tk10,000 crore outside its regular auction schedule—an approach typically associated with immediate funding requirements. Such measures are often linked to priority spending initiatives, including social safety nets and development outlays.
Government Borrowing Plan (April–June)
| Instrument Category | Amount (Tk crore) | Tenure Type | Auction Cycle |
|---|---|---|---|
| 91-day Treasury Bills | 44,000 | Short-term | Weekly |
| 182-day Treasury Bills | 36,000 | Short-term | Weekly |
| 364-day Treasury Bills | 30,000 | Short-term | Weekly |
| Total Treasury Bills | 1,10,000 | — | 12 auctions |
| Treasury Bonds | 39,000 | Medium/Long | Periodic issuance |
Central bank officials stress that these borrowing activities largely represent refinancing operations rather than a net expansion of public debt. Maturing treasury bills and bonds are routinely replaced through new issuances, maintaining continuity in government financing.
Meanwhile, the private sector continues to exhibit subdued credit demand, with growth hovering at just above 6 per cent. Weak investment appetite has led banks to redirect their funds into government instruments, which are considered secure and predictable.
This shift has contributed to a decline in treasury bill yields, which have recently fallen below the 10 per cent mark. The easing of yields reflects both ample liquidity and limited competition from private borrowers, enabling the government to secure funds at comparatively lower cost.
Taken together, the latest auction underscores a delicate balancing act: while liquidity conditions remain supportive, the growing reliance on short-term borrowing signals underlying fiscal strain that may require broader policy adjustments in the months ahead.