Thursday, June 13, 2024

Government bonds subscription beyond expectations

Botswana government’s bonds received an overwhelming thumps up support from investors on Friday as bids went up by more than 100 percent in an attempt to duck-out of the credit crunch battered equity markets.

The government bond BW 003 and BW 004 that each attracts 10.5 percent with varying maturity periods scored highly on a trade that was closed on Friday. The 100 million BW 003 is scheduled to mature on October 31, 2015 received bid amounting P 199 million while BW 004 with equal face value that mature on March 12, 2011 got bids to the tune of P 291 million.
Further, BW005 with a face value of P 100 million and a coupon price of 10 percent received bids amounting P 266 million.

The current issuance of the bonds worth P 3 00 million and Treasury bills to the tune of P 1 billion is part of the government bigger plan to accelerate spending at the height of the global economic crisis.

Delivering the national budget in February this year, Finance and Development Minister, Baledzi Gaolathe called for belt tightening and the need to borrow both locally and internationally in a bid to see through the economy beyond the current financial crisis.

“The current global financial crisis has evolved into a widespread economic crisis, which has resulted in a sharp decline of private demand especially in major industrial economies.

“This crisis continues to affect Botswana , mainly through lower mineral exports and hence reduction in government revenues. It is going to be crucial to find innovative ways of addressing our development needs within limited expected revenue. It is for this reason that a number of belt-tightening will be adopted for the 2009/10 financial year and beyond,” he said.

He said government will pump in P 10.56 billion into the economy for the fiscal year 2009/ 10 that begins in April. The figure is an increase of P 2 billion from the 2008/9 fiscal year that was P 8.5 billion. The budget will be funded by drawing from the foreign exchange reserve and borrowing.

The money will go into government projects that are aimed at stimulating economic growth, reducing poverty and diversifying the economic base in a bid to create more job opportunities. That will include the building of dams, schools and expansion of power station to ensure that the country is self-sufficient in terms of energy.
The decision by government to issue the three bonds and treasury bill was supported by the investment sector which stated that in times of needs like this government should issue some bonds and T-bills.

Government bonds are largely seen as the safest form of investment though they are prone to interest rates moves and deficitsÔÇöbut they provide a necessary hedge against rumor and currency swings that affect the equity markets the most.

This comes at a time when the Botswana Public Pension Fund (BPOPF), is experiencing some difficulties as it lost some 14.56 percent in the nine months to December last year.
“The Chairman and the board of trustees of Botswana Public Officers Pension Fund would like to inform members that for the quarter ended December 2008 the Fund’s investments have continued to experience negative performance as a result of the global financial crisis.
“The performance of for the three months period, i.e., 1st October to 31st was negative 14.56 percent,” the organization said.

“It is not unexpected in the market situation to have such kind of situation. Most of the money that has been invested in the stock market has been washed out,” Leutwetse Tumelo said on Friday.


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