What does trea­sury’s debt retirement mean?

Dünya Executive - - COMMENTARY - Nevzat SAYGILIOGL­U Colum­nist

The Trea­sury and Fi­nance Min­istry an­nounced the Trea­sury’s debt pay­ments and bor­row­ing sched­ule for Au­gust, Septem­ber and Oc­to­ber 2019.

Let’s take a look at these fig­ures. - Trea­sury will pay a to­tal TRY 26.2 bil­lion of do­mes­tic debt in the Au­gust-Oc­to­ber pe­riod. - Only TRY 4.9 bil­lion of the to­tal do­mes­tic debt pay­ment will be prin­ci­pal pay­ment, with in­ter­est making up the re­main­ing TRY 21.3 bil­lion.

- Trea­sury will pay the TRY 19.6 bil­lion of its do­mes­tic debt to the mar­ket and the re­main­ing TRY 6.6 bil­lion to the public. - The bor­row­ing amount from the mar­ket against the to­tal TRY 26.2 bil­lion debt will be

TRY 21.7 bil­lion. That means the bank will bor­row less to pay off its debts and fi­nance them with its own re­sources. In tech­ni­cal terms, the debt ser­vice rate will be 83 per­cent.

- The Trea­sury will pay a to­tal debt of TRY 6.6 bil­lion to the public in these three months and will sell the public TRY 6.5 bil­lion. This means that the Trea­sury will not pay its debts to the public in the next three months and will post­pone it by rollover. In other words, the Trea­sury will sell pa­per to public banks through the “tap­ping” sys­tem. Now let’s look at the facts apart from fig­ures.

• First of all, the Trea­sury will be seek­ing re­sources from the mar­kets five times a month for do­mes­tic debt pay­ments. So, it’s go­ing to bor­row 15 times in three months. • Vari­able-rate, CPI-in­dexed, fixed-rate and coupon-free gov­ern­ment bonds and trea­sury bills and lease cer­tifi­cates will be is­sued dur­ing this bor­row­ing. • Un­for­tu­nately, float­ing rate and CPI in­dexed bonds will be is­sued al­most ev­ery month. The use of float­ing-rate and in­dexed bond is­suance in or­der to ob­tain funds from the mar­kets shows that the in­ter­est and inflation band will not be formed. • The fact that four-fifths of to­tal debt pay­ments cover in­ter­est is chal­leng­ing. This means that the debts of the pre­vi­ous pe­riod are post­poned and thus in­ter­est rates con­tinue to in­crease. This indicates the di­rec­tion of re­sources in the mar­ket and also the de­te­ri­o­ra­tion of income dis­tri­bu­tion.

When we look at it in gen­eral, we see that no spe­cial pro­gram has been im­ple­mented in the pay­ment of public debts, which have kept snow­balling in re­cent years. In other words, we un­der­stand that the way to make debt pay­ments is not by new sources, done by re-bor­row­ing in­stead. How­ever, we all know that stability or aus­ter­ity pro­grams ne­ces­si­tate the de­ter­mi­na­tion of a cer­tain eco­nomic pro­gram frame­work and the search for new re­sources. When we read be­tween the lines, the shift­ing in debt pay­ment is still go­ing on and there­fore the cau­tious path is taken against the po­lit­i­cal moves that may oc­cur in the near future.

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