Government yesterday issued a two-year Treasury Note at a coupon rate of 10 percent — a marketable government debt security with a fixed interest rate and maturity between one and 10 years—to help Treasury raise money to refinance its debt.
The auction for the Note, which after the primary auction may be traded on the Malawi Stock Exchange (MSE), will be conducted on a multiple price bid basis whereby each successful bidder pays the price quoted for the amount tendered.
Reserve Bank of Malawi (RBM) spokesperson Mbane Ngwira said the Treasury Note, which is a monthly or as otherwise prescribed by government, does not have fixed amount and will be issued only for debt restructuring purposes.
“The Note is recurring, as such, it may be issued month by month or sometimes not, depending on the core objective of the bond, which is to raise funds to refinance government debt. The Note is thus there to alert the investing public that there would either on monthly basis or as stated otherwise stated by government be an issue of the Note,” he said.
The bond issuance comes amid growing public debt accrued by government with central bank figures showing public debt at K3098.8 billion at the close of the third quarter of 2018.
Meanwhile, in the 2018/19 Financial Year, Treasury expects to close the year with a fiscal deficit of 242.9 billion to be financed by net external borrowing of K66.8 billion and domestic borrowing of K176.1 billion.
MSE operations manager Esnat Suleman said the Treasury Note increases the government securities on the local shares market, encouraging investors to participate in the diversified products on offer on the MSE.
“This is a good development for the MSE as it increases debt securities market in terms of the number of securities listed. The listing will provide investors a ready market should they desire to sell the security to meet other cash requirements,” she said.
Cedar Capital Limited chief executive officer Armstrong Kamphoni, in an interview with Business News, earlier called for deliberate policies to encourage trading in these instruments, observing that government securities have previously attracted lukewarm response from the investing public.
Said Kamphoni: “Part of such a strategy should involve convergence of issuances on the stock market to encourage trading on the MSE rather than over the counter discounting, which is currently prevalent.”