Siddique Islam

The government has been gradually changing its debt management strategy, focusing more on long-term borrowing, officials said.

Under the new strategy, the government will increase borrowing for longer tenure by issuing different bonds instead of short-term borrowing through treasury bills (T-bills).

The Bangladesh Bank has issued a circular, effective from today (Sunday), asking all commercial banks and non-banking financial institutions (NBFIs) to follow the new calendar of T-bills and bonds auctions for the first six months of fiscal 2009-2010 (FY10) properly.

"We have issued the new auction calendar in line with the cash and debt management committee's advice to the commercial banks and NBFIs with indicative figures of the government borrowing for the first-half of FY10," General Manager of the Debt Management Department of the central bank Mijanur Rahman Joddar told the FE.

A high-power committee on cash and debt management, headed by the finance secretary, is now working on the separation of the cash management from that of the public debt management.

He also said the government is now maintaining such a strategy that might help it pursue development programmes across the country.

The government has already set a net borrowing target of Tk 78.71 billion from the country's banking system to finance budget deficit for the first half of this fiscal.

During FY10, the government will borrow a total of Tk 167.55 billion from the commercial banks and financial institutions through issuing T-bills and bonds.

As part of the strategy, the government has decided to borrow Tk 57.21 billion from the banking system by issuing bonds, while Tk 21.50 billion will be borrowed through auction of three categories of T-bills.

"The government has changed its borrowing pattern aiming to bring dynamism in the country's secondary bond market," another BB official told the FE preferring anonymity.

The official also said the debt management

will help the government even out its payment obligations.

Currently, three T-bills are being transacted through auctions to adjust the government borrowing from the banking system.

The T-bills have 91-day, 182-day and 364-day maturity periods.

On the other hand, four government bonds - 5-year, 10-year, 15-year and 20-year -are being traded in the markets.

Market players, however, said the new borrowing strategy will help the government carry out the long-term development plans, but the overall expenditure of the government may increase due to higher interest payments.