Governor Atiur seeks to allay fears of liquidity crisis from government’s bank borrowing

Bangladesh Bank Governor Atiur Rahman sees no liquidity crisis even in the horizon if the government borrows from banks the entire amount it has targeted in the 2015-16 budget.

He took questions from reporters at a post-budget conference in Dhaka on Friday.

Finance Minister AMA Muhith, who proposed the Tk 2.95 trillion budget the day before, was there.

He proposed to borrow Tk 385.23 billion from banks to narrow the Tk 866.57 billion deficit.

bdnews24.com’s Abdur Rahim Harmachi asked Muhith if the government’s borrowing will squeeze loans for private sector.

He passed the question to Governor Rahman.

Rahman said the government did not borrow much from the banking sector in 2014-15 fiscal since it had also borrowed from savings instruments to cut the deficit.

“Now there is enough liquidity in the banking sector. It is evident from the call money rate. So, borrowing through treasury bonds will not impact the market much.

“Even the rate of interest will not be impacted,” he said.

The central bank governor said the government was also giving the opportunity to take loans from foreign sources to encourage investment.

In 2014-15 fiscal year, the government had set a target to borrow Tk 312.21 billion from the banking sector and Tk 90.56 billion through savings instruments.

Though it borrowed Tk 241.41 billion through the savings certificates, the government did not take loans from the banks.