Treasury Director General Lungisa Fuzile. Photo: Simphiwe Mbokazi.

Cape Town - South Africa plans to raise $1.5 billion (R16.2 billion) a year in capital markets over the next three years, and is confident of issuing an Islamic bond in the coming few months, the Treasury said on Wednesday.

“It is only now a question of timing, when it is right and when we need the money, we will do it,” said Treasury Director General Lungisa Fuzile.

“We expect that we will probably do it before the end of this financial year, it may even be before the end of this year.”

Outlining the country's debt and asset management plan over the next three years, Treasury said it would stop publishing a formal calendar with switch auction dates, and no longer publish pre-set targets, as the market was taking advantage of that information weeks and months before the auctions.

“That information has been used by the market to drive prices in a particular direction, outside of where actual pricing should be, so there's cost distortion and it also creates a lot of volatility in the mark,” said Monale Ratsoma, the liability director.

The weak rand, which fell through the 11 level last week, will see debt-service costs rise.

In the 2013/14 year ending in March, the cost of servicing debt will be 1.5 billion rand ($139.85 million) higher than previously thought.

The amount offered at weekly Treasury bill auctions will increase by 445 million rand as the government aims to reduce pressure on the 3-month bill by increasing issuance amounts of the other maturities.

Domestic long-term loan issuance rose by 5 billion rand this year but is estimated to decrease in the next two years.

Non-residents increased their holding of local government bonds to 36.4 percent in 2013, from 35.9 percent the previous year, outpacing the holdings of domestic pension funds.

The Treasury has increased its estimate of debt stock.

Total debt to GDP is now seen at 41.9 percent in 2014/15 and peaking at a higher rate of 44.3 percent in 2016/17. - Reuters