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The borrowers
TAKING THE BSE TO NEW HEIGHTS: Tsheole

Govt raised over P2.5 billion from local bond market in 2018

Government borrowed over P2.5 billion from the local bond market last year to finance its budget deficits.

This was revealed by Botswana Stock Exchange Limited (BSEL) CEO, Thapelo Tsheole when he presented the Stock Anticipated Performance review recently.

The figure signals government’s intention to borrow locally as compared to borrowing from international lenders to finance its debt.

The finance minister is expected to present the 2019/2020 Budget Speech to Parliament on the 4th of February. The Budget Strategy Paper, a precursor of the Budget Speech, anticipates a P5.11 billion deficit.

When presenting the Paper to stakeholders last August, the Minister of Finance and Economic Development, Kenneth Matambo said the deficit would be financed through a combination of borrowing, both locally and externally, in addition to drawing down on government cash balances.

MINISTER OF FINANCE & ECONOMIC DEVELOPMENT: Kenneth Mathambo

Speaking to Voice Money this week, a local economist at FNB Botswana, Moatlhodi Sebabole says unlike most of its peers, Botswana is not under pressure to significantly borrow or increase its debt.

“Government is employing a prudent fiscal management policy of ensuring that borrowing is within self-imposed debt matrices of 40 percent total debt-to-GDP; 20 percent local debt-to-GDP as well as 20 percent external debt-to-GDP,” he explained.

At the moment, local debt-to-GDP is reportedly below 7 percent, which leaves more room for borrowing locally.

With the government issuing bonds quarterly, Sebabole feels there is an opportunity to increase the frequency as a way to improve capital market efficiency.

The bond market is regarded as another alternative to raise cash for both government and corporate.

Speaking at last week’s Opening Bell Ceremony, Tsheole described the local bond market as one of the best in the continent, second only to South Africa.

“When you look at the bond market, 2018 was the most successful year in terms of the bond trading in the history of our market,” he said.

In terms of diversity, government bonds reportedly stood at seven, up from five in 2017, while corporate bonds increased from 38 to 42.

According to Tsheole, the objective is to reach 50 bonds in the next three years.

Although low in number, government bonds are said to be high in value.

“The dynamics of bond markets in Africa are such that Botswana remains one the most diversified bond market, because we are not necessarily dominated by government bonds, although in terms of value the government bonds are more,” he said.

“We are seeing an increased number of institutions coming to list bonds, and I have got no reason whatsoever not to believe that 2019 will be even better than 2018 in terms of bond listings,” Tsheole concluded.