GOV'T prepares to float P1.9 billion bond

MBONGENI MGUNI
Staff Writer | Monday March 1, 2010 00:00

 

Since the 2008/09 Budget, government has issued four bonds worth P3.1 billion, all of which have been oversubscribed by a liquid market desperate for investment vehicles. The 2008 bond issuance programme was designed to boost capital market activities, reduce the cost of the Bank of Botswana Certificates, and facilitate planning for Government's investment in large-scale development projects under NDP 10.

On Friday, Bank of Botswana Deputy Governor, Oduetse Motshidisi told Monitor that the P1.9 billion bond was due to be floated on the market 'within a week's time.'

'We have already communicated the issue to the market and this is being done in the framework of the 2008 bond issuance programme.

'Funds raised will be used for tertiary development projects such as the Botswana International University of Science and Technology,' he said. The impending bond issue will be government's largest under the 2008 programme, underlining its confidence in the liquidity of the local capital market.

Meanwhile, the Bank of Botswana is in discussions with government on the logistics of financing part of the 2010/11 Budget from a bond issuance programme.

Besides bonds, government hopes to raise the anticipated P12.1 billion deficit from external borrowings and drawing down on savings.

Motshidisi said while government and the Bank of Botswana were agreed in principle on raising part of the deficit from the capital market, several issues related to the exercise were under discussion.

'In view of the budget situation, government has made indications that they will look at a combination of funding which will include bonds. Discussions are going on between the BoB and government on the quantum that will be appropriate.

'There has to be a balance because this is a debt exercise and it has to be studied very carefully,' he said.The Deputy Governor explained that issues such as sustainability of debt, amount of funds to be sought, effects of the bond, were being discussed.

'These issues have to be discussed; for instance the issue of the sustainability of debt is important because you don't want to over-borrow,' he said.

The Ministry of Finance and Development Planning as well as the BoB, are keeping an eagle eye on government's debt, which emerged as a fiscal and monetary issue as a result of the global recession. Besides the P3.1 billion owed by government to the capital market, it also owes the African Development Bank, the World Bank and other lenders, billions of Pula borrowed in support of development projects.

For the 2010/11 financial year, government plans to establish a Public Private Partnerships (PPP) Unit within the Finance Ministry, as an alternative means of financing projects. The Unit will coordinate and guide the implementation of the PPP policy of 2009.