By: Nghiinomenwa-vali Erastus

 

THE government’s treasury has issued a market notice seeking to secure N$2,6 billion in borrowings this week.

These funds will not only help bridge the budgetary gap for the 2023/24 fiscal year but also prepare for the repayment of the maturing GC24 bond next year in October.

According to the notice released by the central bank, which manages borrowings on behalf of the treasury, these funds will be raised through two auctions.

The Ministry of Finance is addressing the budget deficit, which has grown due to revenue shortfalls.

The shortfall is a result of budgetary needs exceeding estimated revenue.

On Thursday, October 12, 2023, the government plans to raise N$1,2 billion through a Treasury Bill auction, offering bills with maturities of 91 days, 182 days, 273 days, and 364 days.

The following day, on Friday, October 13, the government will hold an auction for long-term instruments, specifically bonds, with the aim of borrowing N$1,4 billion.

Treasury bills are short-term borrowing instruments, allowing the government to raise money from the market at a discounted price and repay the full amount at maturity.

In their market notice, the government also indicated that they are preparing for the upcoming GC23 bond redemption scheduled for October 15, 2023.

According to the notice, on Thursday, the government seeks N$300 million through the four Treasury Bills (91-day, 182-day, 273-day, and 364-day).

These bills will mature in January 2024, April 2024, July 2024, and October 2024, respectively.

Regarding bonds, the government is offering 12 of its regular bonds and aims to secure N$1.3 billion in borrowings.

Additionally, for the four inflation-linked bonds (linkers), the government plans to borrow N$180 million, signalling a cautious approach to inflation.

The central bank noted that they have increased the offer amounts in response to the strong demand observed in recent auctions.

This adjustment aims to frontload their borrowing requirements and secure cash ahead of the GC23 bond redemption.

The government maintains a sinking fund for bond redemptions, with a current balance of N$1,9 billion, after a transfer of N$300 million for the October 2023 GC23 bond redemption.

The central bank explained their strategy, stating that they intend to preserve some of the sinking fund money by raising an additional cash buffer to redeem the GC23 bond.

“We would like to preserve some of these funds by raising an additional cash buffer to redeem the GC23 and not deplete all cash in the sinking fund based on the strong auctions we have seen of late,” the central bank stated.

This approach ensures they do not deplete all cash in the sinking fund, considering the robust demand for government debt as an investment option.

The central bank emphasised that while they will use the sinking fund as a buffer, they remain highly price-sensitive in their borrowing decisions.

erastus@thevillager.com.na