What does treasury’s debt retirement mean?
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.