Caps on issuance of Treasury bills
A draft bill on public debt management that will cap Treasury bills at 3% of annual and extra budget expenditure is aimed at improving the government’s cash management efficiency and cutting financial costs to avoid a larger budget deficit, says the head of the Public Debt Management Office (PDMO).
The amended law will allow PDMO to issue Treasury bills at no more than 3%, but issuance together with borrowing to offset the budget deficit must not exceed 20% of the annual and extra budget, said Prapas Kong-Ied, director-general of PDMO.
The current law does not specify the maximum proportion of Treasury bill issuance, stipulating that borrowing, including Treasury bill issuance, must not exceed 20% of annual and extra budget expenditure and 80% of the budget for debt principal repayment.
“The amendment aims to help the government manage financial liquidity by not raising the budget deficit limit,” Mr Prapas said.
He said a cap on Treasury bill issuance will help slim down the government’s cost.
During 2006 to 2016, the government had a combined cost of 3 billion baht or 300 million a year from offering Treasury bills.
The current law requires the Finance Ministry to borrow for financing budget deficits within the same fiscal year. The government then faces unnecessary costs for borrowing in advance in the event of a carry-over budget, he said. The amendment will allow the ministry to offer Treasury bills periodically when it needs money for budget disbursement.
Treasury bills are a debt instrument issued by the Finance Ministry with a 120-day maturity. They are used to maintain liquidity for budget disbursement while the government awaits revenue.
The draft bill is expected to win the National Legislative Assembly’s approval and be enforced early next year after already being approved by the Council of State and passing a public hearing.
Mr Prapas recently said the amendment would require a report to parliament of the outstanding Treasury bills at the end of every fiscal year.