Govt raises N$350m from Treasury bills

Government has raised N$350 million (43.75% of the intended targeted) from Treasury Bills (TBs) out of a projected target of N$800 million within the month of October, The Villager can reveal.

The set target comprised N$410m in TBs, whilst the remaining N$390m was expected from longerdated debt instruments, which collectively amounted to the said N$800m.

Finance Minister Calle Schlettwein told The Villager this week that during the period under review, market conditions could not allow Government to raise the set target.

During the month of September, in terms of the latest statistics, the bond sales failed dismally as an IRS sales target of N$430m was set, and only N$153.3m was raised as there was an under-subscription of 90%.

To date, Government has raised N$6.1 billion, which is 75% of the sales target, and Government targets to raise N$8.1 billion from the domestic market through Treasury bills and Internal Registered Stock/Treasury bonds (IRS) over the fiscal period of April 2015 to March 2016.

“Total domestic borrowing to date amounted to N$4.6 billion. Government has also issued N$1.5 billion from the South African market for a purpose funding the budget deficit. Going forward, till March 2016, the Government will continue to fund the budget deficit by selling TBs and Internal Registered Stock (IRS) in the domestic market, but at a reduced volume,” Schlettwein said.

He justified the low achieved targets by saying during the past few months, Government Treasury Bills and Bonds recorded continuous low demand across the different instruments on offer in the domestic market.

“This low demand is more prevalent in the medium-term instruments, whilst shorter and longerterm instruments recorded strong demand. The low demand can be attributed to a high interest rate expectation, which has reduced the demand for fixed-rate instruments globally. Further, the effects of increasing the supply of credit to finance households and Government borrowings has benefitted from domestic financing, and thus has reduced excess liquidity in the local financial markets over time. This means that there is, to some extent, less liquid assets available to support increased borrowing activity,” he noted.

He added that the size of the 2015/16 domestic borrowing requirement is the highest on record that the Namibian Government has attempted to raise in the local market since independence. Thus, the increased funding needs over the past fiscal years also exerted further pressure on the domestic funding base.

“However, despite all this, substantial domestic capital continues to flow out of the country. As Namibia continues to be a net exporter of sizeable capital, we believe there still remains room for such capital to be invested in domestic securities, including those issued by the Government.

"The Government is, nonetheless, confident that the budget deficit will be funded comfortably during the current fiscal year. So far, we have funded more than 70 per cent of our borrowing needs this year. Further to that, the Government has a dynamic and diversified funding strategy, which aims to complement each other during times like this.

"In recognition of the low demand in some instruments in the domestic market, the Govt raises N$350m from Treasury bills Borrowing Plan has been adjusted accordingly starting in October to minimize the shortfall without compromising the sustainability of the debt portfolio,” Schlettwein stated.

He added that the budget deficit for the 2015/16 fiscal year is almost fully-funded, and tthere are no plans to raise funds on the international markets during the current MTEF period.

Meanwhile, the debt stock has increased from N$35.95b in FY2014/15 to an estimated N$50.8b in FY2015/16, which is 29.8% of the revised GDP.

During his midterm budget review, Schlettwein said the above is in line with the deficit financing plan over the current MTEF and is well below the 35% benchmark, adding that halfway through the budget implementation calendar, the Government was able to finance up to 61 per cent of the budget deficit.

In line with the debt market diversification programme, the Government also successfully raised its second US-Dollardenominated bond in October this year to the tune of US$750.00 million (N$10.38 billion).

Schlettwein said the proceeds of this issuance will support the stock of international reserves, infrastructure project financing and programmes to improve the productive capacity of the economy.

Particularly, US$300 million will be set aside as a measure to support the foreign reserves’ position, while US$450 million will finance development projects. The raising of the international bond is an integral part of the deficit financing plan for the current budget and over the MTEF.