14 Jun 2023

The 2023/2024 borrowing strategy and issuance calendar outlines government’s total financing strategy in the domestic capital market, and its specific intentions for the issuance of its debts securities, says Minister of Finance, Ms Peggy Serame.

On Tuesday, Ms Serame officially launched the 2023/2024 government borrowing strategy and issuance calendar in Gaborone.

The strategy will provide the market with preliminary information on the treasury bills and government bonds to be issued during the year, the timing of issuance as well as other possible special operations, such as bond buybacks and switch auctions, she said.

Ms Serame said formulating this strategy and issuance calendar took into account government’s objectives for financing, managing risk as well as domestic market development.

Notably, she said, consideration was also made for macroeconomic conditions, monetary policy, as well as investor preference, citing that the new issuance calendar had been revamped to include additional details.

Ms Serame explained that the details will provide market participants with better transparency, predictability, as well as a more secure basis from which they will be able to formulate their investment decisions.

From the issuer’s perspective, Ms Serame said the borrowing strategy and issuance calendar will provide potential cost-saving, as well as an enhanced potential for liquidity in the secondary market.

“Despite the impressive achievements of our domestic bond market, our domestic capital market is still facing challenges that we collectively have to surmount,” she said, noting that the secondary market for government securities was still characterised by lack of liquidity, stemming from a high degree of instrument fragmentation as well as a relatively narrow investor base.

Ms Serame reiterated that results of this structural feature was the payment of a premium by issuer (and ultimately the taxpayer) to investors, to compensate them for the risk of holding relatively illiquid securities.

Therefore, she said government, with the assistance from multilateral development partners such as the International Monetary Fund (IMF), was actively engaged in identifying deficiencies and implementing reforms in the various sub-sectors of domestic bond market.

Moreover, she highlighted that a Local Currency Bond Market Technical Mission identified several potential areas for improvement, across all the building blocks of the domestic bond market, including money market transparency.

Meanwhile, ACI Botswana President, Ms Bakang Mabisi said the launch of the 2023/24 Government Annual Borrowing Strategy and Auction Calendar will provide primary lenders with tools to be more efficient in their role.

Ms Mabisi said transparency in its highest form enhanced the orderly and effective operation of financial markets by better informing participants.

She emphasised the growing importance of openness in debt management and government securities markets.

She said the introduction and launch of the issuance plan will not only allow primary dealers to disseminate information locally and market bonds in accordance with their mandate, but it will also provide a leeway to do so on an international platform.

This, she said, will allow foreign institutions to become active in local markets, which offer several benefits to their emerging and local bond market.

She also said international investors will increase competition and market credibility by expanding the scope of financial intermediation with a foreign customer base and increasing the availability of capital locally. ENDS