Bangladesh Bank maintains the accounts of the government. When revenue or loan is received, it is deposited in the government account. Salaries, loan payments, subsidies, project expenses and contractor bills are paid from this account. Many times the government’s account becomes empty. For this purpose, Bangladesh Bank has set a borrowing limit of Tk 120 billion each for two accounts – Ways and Means and Overdraft.
Ways and Means Advance is a short-term loan taken from the central bank to meet temporary cash shortages in government finances. When the government faces a short-term cash gap – such as before tax revenues arrive – it borrows from the central bank for very short periods.
For example, at the beginning of a month, the government may have large expenses such as salaries, development project payments, and electricity and energy bills. This short-term loan is taken to meet such expenses. The same thing applies to overdraft borrowing.
If the government cannot borrow from commercial banks, it borrows directly from Bangladesh Bank, thereby creating money.
Bangladesh Bank report shows that although Tk 120 billion was borrowed under Ways and Means, overdraft borrowing has reached Tk 224.74 billion. Furthermore, during the tenure of the ousted Awami League government, Bangladesh Bank purchased treasury bills and bonds and lent money to the government. It is now 681.32 billion taka. Overall, government borrowing from Bangladesh Bank is more than 1.22 trillion taka (122,007 crore), of which 235.83 billion taka was borrowed in the current financial year.