Gov't hits P15bn domestic borrowing ceiling
Mbongeni Mguni | Friday May 29, 2020 18:18
Since 2008, the domestic issuance programme has guided government on borrowing from the local capital market. From a ceiling of P5 billion in the original programme, Parliament approved the increase to P15 billion in 2011.
Today, the Bank of Botswana (BoB), which manages government’s domestic borrowing programme through auctions held every three months, will float a Treasury Bill and three bonds seeking P1.85 billion in borrowings for government.
“If the current auction is fully allocated, this would exhaust the existing P15 billion programme in place,” Stanbic Bank’s heads of global markets as well as corporate and investment banking, Lesego Osman and Sheperd Aisam respectively, told BusinessWeek.
“It should be noted that government through the appropriate governance structures is at liberty to extend the current note programme and or initiate a new one.”
BoB governor, Moses Pelaelo recently revealed that a request to double the P15 billion programme was before President Mokgweetsi Masisi. Even when doubled, the domestic borrowings would still fall below the 20% of GDP borrowing rule government has.
Osman and Aisam said they expected robust demand from market participants at today’s auction.
“With government forecasting a much higher than budgeted deficit, the use of the quarterly bond auctions as a funding tool for the forecasted deficit would be prudent. “Further the recent reduction in the Primary Reserve Requirement has increased liquidity in the market of which government could look to tap into as part of its funding plan.
“This provides a benefit to government as domestic rates are at historic lows thus minimising the cost of borrowing and heeds the call of the insurance and asset management industry for increases in pools of domestic assets.”
Kgori Capital Investment analyst, Kwabena Antwi told BusinessWeek that recent trends supported the idea that today’s auction was leaning towards oversubscription.
“There should be adequate uptake of the issuance,” he said.
“There was excess demand at its February 2020 auction (where) P740m of bids were received for the BW013 bond when only P300mn was available and likewise P956m of bids were received for the BW014 when only P400mn was offered.”
It is expected that the President will approve the doubling of the note programme to allow the BoB to ramp up its auctions and plug the P10.8 billion deficit forecast for 2020-2021.