Fi­nance min­istry hopes to rely less on Cen­tral Bank

The Myanmar Times - - Business - SWAN YE HTUT swanye­htut@mm­

THE gov­ern­ment is hop­ing the start of Trea­sury bond auc­tions in mul­ti­ple de­nom­i­na­tions will al­low it to rely less on sell­ing gov­ern­ment debt to the Cen­tral Bank, U Maung Maung Win, deputy min­is­ter for plan­ning and fi­nance, told a Pyi­daungsu Hlut­taw ses­sion on Au­gust 23.

The in­au­gu­ral bond auc­tion is sched­uled for Septem­ber, and the gov­ern­ment will auc­tion bonds in three sep­a­rate ma­tu­ri­ties this fi­nan­cial year, U Maung Maung Win said.

The auc­tions will likely start with the sale of two- or three-year debt, and are part of an ef­fort to fol­low in­ter­na­tional stan­dards and is­sue bonds at mar­ket price.

The deputy min­is­ter said the shift to an auc­tion sys­tem meant the amount of debt sold to the Cen­tral Bank should de­cline. The gov­ern­ment sold K2.99 tril­lion in gov­ern­ment debt to the Cen­tral Bank in the 2015-16 fis­cal year, U Maung Maung Win told par­lia­ment, and gave sev­eral rea­sons why the amount had in­creased to that level.

The gov­ern­ment be­gan sell­ing short-dated Trea­sury bills through an auc­tion sys­tem in early 2015 in an ef­fort to re­duce the amount it sold di­rectly to the Cen­tral Bank.

But the in­ter­est rate which com­mer­cial banks – the only per­mit­ted in­vestors – had de­manded was high, and the gov­ern­ment was un­able to sell the amount it wanted to. Be­cause sales were lower than the gov­ern­ment had hoped, it turned to sell­ing debt to the Cen­tral Bank, said U Maung Maung Win.

Heavy re­demp­tions had also pushed up sales to the Cen­tral Bank, he added. The gov­ern­ment sold K809.2 bil­lion of trea­sury bills to in­vestors dur­ing the eight months from April 2015 to Novem­ber of that year.

But re­demp­tions to­talled just over K1 tril­lion, which was an­other rea­son that sell­ing to the Cen­tral Bank had in­creased, U Maung Maung Win said.

Trea­sury auc­tions were also sus­pended in Novem­ber, while the sale sys­tem was moved onto the new CBMNET clear­ing sys­tem. This had left the gov­ern­ment un­able to sell di­rectly to in­vestors, he added.

The gov­ern­ment is hop­ing to sell around K1 tril­lion (US$841 mil­lion) in gov­ern­ment debt dur­ing this fi­nan­cial year, but this tar­get can change based on in­vestor in­ter­est, U Maung Maung Win pre­vi­ously told The Myan­mar Times.

He also said that the min­istry will now de­cide on a “case-by-case ba­sis” whether the Cen­tral Bank is al­lowed to pur­chase gov­ern­ment debt at a lower rate than the auc­tion re­sult.

– Trans­la­tion by San Layy

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