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Gov’t ups borrowing, seeks P1.95bn

Government will today (Friday) return to the capital market seeking P1.95 billion in debt, the second approach under the newly increased domestic borrowing limit of P30 billion.

The government, through the Bank of Botswana (BoB), borrows quarterly from the local capital market through Treasury Bills and bonds, mainly to develop the local market’s capacity, but increasingly to fund gaps in the national budget.

Government’s finances have been thrown into crisis by the coronavirus (COVID-19), which has devastated mining, tourism and other sectors, which are traditional lines of revenue for the national budget.

Since Parliament raised the domestic debt ceiling to P30 billion from P15 billion in September, the BoB has increased the frequency of Treasury Bills and bonds auctions to monthly from quarterly. Last month, government floated Treasury Bills and bonds for P2.6 billion and raised P1.6 billion in funding.

According to documents circulating in the capital market this week, government will today float two Treasury Bills maturing in six months and 91 days and offering P250 million and P500 million respectively.

The BoB will also reopen three existing bonds, offering P1.2 billion in total to investors who exclusively comprise certain commercial banks.

The bonds carry maturities ranging from 2023 to the year 2025. Meanwhile, government’s funding needs this fiscal year have risen, with the latest projections showing that the forecast budget deficit for 2020-2021 will be P15.2 billion, up from the initial forecast of P13.6 billion.

According to the Finance Ministry’s draft Budget Strategy Paper, the higher deficit forecast is as a result of higher spending, with the expenditure for 2020-2021 now expected at P67.5 billion from an initial forecast of P65.95 billion.

Recurrent expenditure in the latest estimates is forecast

at P55.6 billion from P50.4 billion, while development or project spending is expected to reach P12 billion from P11.1 billion. Finance and Economic Development minister, Thapelo Matsheka has said the bulk of the deficit funding will be sourced from the local capital market, although talks have been initiated with external financiers such as the World Bank. Matsheka has also said government is restrained from tapping into the Government Investment Account (GIA), the traditional reserves used to support budget deficits.

“It is important to point out that unlike in previous economic crises, such as that of 2008-2009, the 2020 COVID-19 induced economic crisis comes at a time when the country’s net financial position is not strong,” he said in Parliament when proposing the P30 billion debt limit.

“In particular, the balance in the GIA has decreased over the past years. “It is therefore not advisable to draw down on the GIA as the main source of financing for the anticipated deficits, as has been done in the past.”

He added: “Prior to the financial crisis of 2008-2009, the GIA amounted to P30.5 billion in December 2008, which is equivalent to 41% of GDP. “As at December 2019, however, it stood at P18.3 billion, only nine percent of the GDP. “It would, therefore, be advisable to avoid excessive drawdown from the GIA in order to preserve it as a financial buffer.”

The GIA in August was pegged at about P11 billion from P13.8 billion in June and P19.5 billion in August 2019.


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