Finance ministry hopes to rely less on Central Bank
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