{"id":7756,"date":"2022-05-30T10:50:27","date_gmt":"2022-05-30T10:50:27","guid":{"rendered":"https:\/\/www.africa-press.net\/botswana\/all-news\/govt-debt-burden-climbs-to-p10bn"},"modified":"2022-05-30T19:30:08","modified_gmt":"2022-05-30T19:30:08","slug":"govt-debt-burden-climbs-to-p10bn","status":"publish","type":"post","link":"https:\/\/www.africa-press.net\/botswana\/all-news\/govt-debt-burden-climbs-to-p10bn","title":{"rendered":"Gov\u2019t debt burden climbs to P10bn"},"content":{"rendered":"

Africa-Press – Botswana. <\/strong><\/span>The Ministry of Finance expects to spend about P10.4 billion settling the principal and interest on various local and external debts this financial year, more than 33% higher than it paid out two years ago, BusinessWeek has established.<\/b><\/p>\n

The higher bill, insiders say, is due both to government\u2019s deepening credit appetite since COVID-19 arrived and upset the budget, as well as rising interest costs incurred when the local market prices in higher inflation and a sovereign credit downgrade.<\/p>\n

After the pandemic hit in March 2020, government largely funded the budget gap through drawdowns from its reserves, leaving them at an all-time low of about P3.4 billion in December 2020. From September of that year Parliament authorised the doubling of the domestic debt ceiling to P30 billion, while government\u2019s agent in the capital market, the Bank of Botswana (BoB), introduced monthly bids for debt, in order to cover the widening budget deficits.<\/p>\n

A finance ministry note seen by BusinessWeek indicates that while a total of P7.8 billion was paid out as public debt in the financial year to March 2021, an amount of P10.4 billion has been allocated for the year to March 2023. The total paid out for the 2021 fiscal year includes P2.2 billion as settlement of a bond which matured in September of that year.<\/p>\n

Actual public debt costs for the 2021\u20132023 financial year were not made available to Mmegi, although forecasts in the notes range from an approved budget of P6 billion to P12.6 billion.<\/p>\n

The finance ministry documents indicate that the majority of costs in the public debt programme this year will come from the settlement of Treasury Bills, the shorter-term notes which have proved more popular with the capital market since the monthly auctions of government securities were introduced two years ago.<\/p>\n

The BoB, as government\u2019s banker, conducts monthly auctions of treasury bills and long term government bonds to primary dealers who are exclusively banks. At the auctions, the dealers compete to lend to the government by offering the yields they are seeking, with the BoB deciding the ‘stop-out’ yield or the level of interest it is willing to pay the dealers on particular securities on offer.<\/p>\n

The P30 billion programme has generally underperformed with nearly all of the auctions since September 2020 delivering less than what government was seeking. Most of the funding has come from the shorter-term treasury bills, whose maturities range from three, six, and 12 months as opposed to bonds where maturities range from three to 21 years.<\/p>\n

The finance ministry expects to pay out P7 billion this fiscal year on the settlement of the treasury bills alone, compared to P2.9 billion in the year to March 2021. The BoB\u2019s indicative debt schedule shows that treasury bills will be offered at all the remaining auctions this fiscal year, except at the last auction in March 2023.<\/p>\n

Analysts have said shorter-term securities are preferred as they have lower risks than the long term notes and while investors such as pension funds prefer the longer-maturing paper, the yields they have been demanding to cover the risks have largely been rejected by the central bank.<\/p>\n

Government also expects to pay about P1.3 billion in interest payments on the various bonds it offers to the capital market this year, compared to P910.4 million in the year ended March 2021.<\/p>\n

The central bank has said it is keeping an eagle eye on government\u2019s debt burden and while the various amounts owed are still below the 40% of Gross Domestic Product limit, the capital market\u2019s demands for higher yields is concerning.<\/p>\n

\u201cI consider it unfortunate that in the recent past we have seen bid yields for medium to long-term government bonds that are exceptionally high and clearly out of line with the monetary policy posture and medium-term inflation prospects and also not reflecting the sovereign credit rating for Botswana,\u201d BoB deputy governor, Kealeboga Masalila said previously. \u201cTherefore, the market (is) failing to provide cost-effective funding of government.\u201d “Let us reflect on this as market participants and work together to address any challenges or frictions that drive such behaviour.”<\/p>\n

BoB governor, Moses Pelaelo previously told BusinessWeek that investors, who include pension funds, were possibly more interested in the South African market which is highly liquid and features a strong presence of international investors.<\/p>\n

\u201cWhen people look at the yields here and those from others, they may have that view, but they forget the risk-adjusted returns between the two markets,\u201d he said. \u201cSome of the reasons we are getting, we don\u2019t understand and we have to find a reason why this is the case.\u201d<\/p>\n

Finance Minister Peggy Serame previously told BusinessWeek that government was considering introducing inflation-linked bonds to attract investors interested in matching assets and liabilities.<\/p>\n

Meanwhile, government expects to also pay P1.5 billion as the principal for various other loans, an amount that includes just over P1 billion for the budget loan sourced from the African Development Bank in 2009. Payments of interest on external borrowings are forecast at P517.6 million for 2022\u20132023, compared to P262 million for the year ended March 2021.<\/p>\n

For More News And Analysis About Botswana<\/a> Follow Africa-Press<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

Africa-Press – Botswana. The Ministry of Finance expects to spend about P10.4 billion settling the principal and interest on various local and external debts this financial year, more than 33% higher than it paid out two years ago, BusinessWeek has established. The higher bill, insiders say, is due both to government\u2019s deepening credit appetite since […]<\/p>\n","protected":false},"author":84,"featured_media":7755,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2,5,8,16],"tags":[233,237,234],"class_list":["post-7756","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-all-news","category-economy","category-homepage-english","category-twitter","tag-africa-press","tag-africa-press-botswana","tag-botswana"],"yoast_head":"\nGov\u2019t debt burden climbs to P10bn - Botswana<\/title>\n<meta name=\"description\" content=\"The Ministry of Finance expects to spend about P10.4 billion settling the principal and interest on various local and ...\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.africa-press.net\/botswana\/all-news\/govt-debt-burden-climbs-to-p10bn\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Gov\u2019t debt burden climbs to P10bn\" \/>\n<meta property=\"og:description\" content=\"The Ministry of Finance expects to spend about P10.4 billion settling the principal and interest on various local and ...\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.africa-press.net\/botswana\/all-news\/govt-debt-burden-climbs-to-p10bn\" \/>\n<meta property=\"og:site_name\" content=\"Botswana\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/AfricaPressTunisiaa\" \/>\n<meta property=\"article:published_time\" content=\"2022-05-30T10:50:27+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2022-05-30T19:30:08+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/static.africa-press.net\/botswana\/sites\/38\/2022\/05\/img-62951b0055e51.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"800\" \/>\n\t<meta property=\"og:image:height\" content=\"532\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"cfeditoren\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"cfeditoren\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"4 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/www.africa-press.net\/botswana\/all-news\/govt-debt-burden-climbs-to-p10bn#article\",\"isPartOf\":{\"@id\":\"https:\/\/www.africa-press.net\/botswana\/all-news\/govt-debt-burden-climbs-to-p10bn\"},\"author\":{\"name\":\"cfeditoren\",\"@id\":\"https:\/\/www.africa-press.net\/botswana\/#\/schema\/person\/068c7ab4e9634ae78ec5d54ec46598bb\"},\"headline\":\"Gov\u2019t debt burden climbs to P10bn\",\"datePublished\":\"2022-05-30T10:50:27+00:00\",\"dateModified\":\"2022-05-30T19:30:08+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/www.africa-press.net\/botswana\/all-news\/govt-debt-burden-climbs-to-p10bn\"},\"wordCount\":856,\"commentCount\":0,\"image\":{\"@id\":\"https:\/\/www.africa-press.net\/botswana\/all-news\/govt-debt-burden-climbs-to-p10bn#primaryimage\"},\"thumbnailUrl\":\"https:\/\/static.africa-press.net\/botswana\/sites\/38\/2022\/05\/img-62951b0055e51.jpg\",\"keywords\":[\"Africa Press\",\"Africa Press-Botswana\",\"Botswana\"],\"articleSection\":[\"all news\",\"economy\",\"homepage-english\",\"twitter\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\/\/www.africa-press.net\/botswana\/all-news\/govt-debt-burden-climbs-to-p10bn#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.africa-press.net\/botswana\/all-news\/govt-debt-burden-climbs-to-p10bn\",\"url\":\"https:\/\/www.africa-press.net\/botswana\/all-news\/govt-debt-burden-climbs-to-p10bn\",\"name\":\"Gov\u2019t debt burden climbs to P10bn - 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