Supply ot treasury bills, the financial instru inent through which the government borrows from the banking system, has dried up. That is what a report carried by us says The reason is apparently simple. The government does not need to borrow money and it has no occasion to issue new treasury bills. At first glance, this phe nomenon could be read as a proof of prudential financial management. Hut it could also be that the government is unable to spend money the way it had planned. If that be so. then it could also be interpreted as a lack of dynamism in ft nancial management.

Governments spend money not Just to meet current needs. They also invest in the future by way of development outlay. Current revenue yields may not always suffice to generate adequate re sources to pay for expenditure on development Governments are then obliged to go for domestic borrowings. This is not to say that governments would embark on domestic borrowings as a mat ter of course. That again might reflect mfsman-agement of government finances, bordering on profligacy. What is important is that governments must spend the money earmarked for meeting perceived developmental expenditure needs in full. If resources are in surplus because funds budgeted for developmental outlay remain un spent, then that could be an indication that government finance is in a moribund stage.

The lacklustre performance of public investment programme in our case tends to suggest that the government is failing to spend public revenue earmarked for developmental expenditure. Government's success in reaching, if not ex ceeding, targets for public 'investment outlay would nave provided a surer test of its real needs for domestic borrowing.

So much for government's short-term domestic borrowings against the usual ninety-day treasury bills. All the same, government had been borrowing on longer terms, through its savings . instruments and occasional floatation of bonds, the latter tied to specific purposes. Some time back, government sold T&T bonds. It is said that it would soon be issuing bonds to the commercial banks on account of the debts of the Jute mills and the Bangladesh Agricultural Development Corporation (BADC) to be redeemed sometime in the future. Likewise, public borrowings under the savings instruments also would be due for repayment on maturity.

Interestingly enough, the issue of government's borrowings has cropped up now because of the problems in fund placement faced by the banks. As it happens, commercial banks have to maintain a minimum reserve with the central bank in the form of liquid assets to ensure their ability to meet the customers withdrawal of deposits at any time. The smaller portion of the reserves is kept in cash, the balance in anproved securities. Treasury bills are the securities banks usually deposit. Banks earn the normal yield on these securities although the papers remain in the central bank’s custody. Now that treasury bills are not available, banks have to put up cash instead. However, these additional cash deposits dd not earn any return.

It is said that the authorities are considering the proposition of paying the banks an interest on the additional cash deposit. Naturally, such an arrangement will entail extra cost. And the problem arising out of shortage of treasury bills would persist. Instead of issuing specific purpose bonds, government could float long-term bonds for sale through auction. The market would then determine the yields. Bond flotations could be spaced suitably over the year. Specific needs, including bank debts assumed by the government, could be met from the sale proceeds of these general pur-Eose bonds. Such a move would establish a mar-et for government bonds with its attendant benefits for the financial sector as a whole.