Govt targets November Parliament for bond programme

MBONGENI MGUNI
Staff Writer | Friday September 10, 2010 00:00

Envisioned by the February budget, the programme - through which government borrows from the capital market - was originally targeted at plugging the 2010/11 budget deficit, forecast at P12.1 billion. However, thanks to its wide-ranging spending cuts across the budget, Government was able to create elbowroom in which to thrash out the proposed bond programme.

This week, highly placed government sources told BusinessWeek that with the finalisation of the P5-billion 2008 bond programme on Wednesday, a new schedule was being prepared for approval by the November Parliament.

This, the sources said, would enable the floating of the first bonds and treasury bills as part of the new programme next March. The Bank of Botswana, the government's agent in the capital raising, floats bonds and treasury bills every March and September according to the issuance programme in play.

'It is hoped that the ministry will be able to approach the November sitting of Parliament with a bond issuance programme to cover the next few years,' said one source.

'Although Government has been able to cut its spending and thus reduce the urgency of the programme, it will nonetheless go ahead because these funds are needed to support the budget over several years.

'You'll notice that the 2008 programme supported Government from that time until 2010. The programme that will go into the November Parliament will also cover several years.

'This programme will be critical given that government expects to run a deficit in the coming years until about 2013 or 2014. It is also important as part of the development of the capital market.'

With the 2008 programme having elapsed this week through the raising of the final P1.3 billion by government, the approval by Parliament will pave the way for the new issue of government paper next March.

Finance ministry technocrats are reportedly hammering out the quantum of bonds and treasury bills to seek Parliamentary approval. The IMF's lower 2010/11 deficit projection, government spending cuts and rising revenues, external debt and ministry-wide under-spending are among factors that will influence the ongoing debate.

In addition, the October round of budget revision and forecasting will enable the finance ministry to gauge what quantum of bond issuance to approach Parliament for. Next month, the ministry will revise the 2010/11 budget forecasts and simultaneously produce forecasts to be used in next year's budget.

However, it is also expected that infrastructural and other developments under NDP 10 will play a major role in the final figures to be presented to legislators.