The government borrowing limit from Bangladesh Bank through low-interest loans has been increased to Tk 4,000 crore from Tk 2,000 crore for a financial year, said officials of the central bank.
The government decision to increase borrowing through Ways and Means Advanced with an interest rate of 5.25 per cent came in to effect from July 9, 2013, a BB official told New Age on Wednesday.
The government mainly borrows from the central bank through the WMA, overdraft and devolvement system.
He said the government had made the decision in a bid to avoid the borrowing through the overdraft drawing from the central bank as the rate of interest on overdraft was higher than the WMA.
The government pays the interest rate equivalent to reverse REPO (repurchase agreement) to the BB for the loan through the WMA.
The rate of interest on reverse REPO is now 5.25 per cent.
The interest rate on overdraft is equivalent to reverse REPO plus 1 per cent.
‘We have implemented the new limit of WMA in line with the cash and debt management committee’s decision, which is planning to discourage overdraft drawing for long,’ the BB official said.
The government does not need to issue any kind of securities to take loan from the BB through the WMA.
The central bank takes a promissory note from the government when it releases loan under the WMA system. The government has to take loan through the overdraft drawing and devolvement system if it fulfills the WMA cap. The government issues its securities when it takes loan through the devolvement way.
The government earlier increased the WMA cap to Tk 2,000 crore from Tk 1,000 crore in July 2011 which came into effect since the beginning of the FY 2011–12.
Another BB official said the government had increased the WMA cap as its borrowing tendency from the banking sector had increased in the last few years.
The BB data showed that the government borrowing from the banking source had stood at Tk 24,776.43 crore in the FY 13 against Tk 21,459.03 crore in the FY 12.
-With New Age input
