Govt auctions R1.2bn in bonds as Eskom bailout, revenue shortfall poke holes in budget
JOHANNESBURG – The National Treasury on Thursday announced a R1.2 billion increase in the fixed-rate and inflation-linked bonds weekly auction, from R3.3bn to R4.5bn.
Treasury said that Eskom's R59bn bailout and the preliminary indication of tax revenue shortfall announced by the finance minister in the special appropriation bill speech last week had prompted government to revise its funding strategy and an increase in government's borrowing requirement for the 2019/20 financial year.
Government entities regularly issue bonds and list them on the Johannesburg Stock Exchange (JSE) debt board to raise funds for large capital projects, and investors lend money to these entities by buying the bonds.
Investors buy government bonds in order to earn for regular interest payments and receive the money they have lent back after a predetermined period. More than R1 trillion is currently listed on the JSE's debt board and these instruments account for 90 percent of all liquidity reported to the JSE.
Treasury said that the inflation-linked bond auction amount will increase by R280 million, from R760m to R1.04bn.
But there shall be no further switch auctions for the rest of the 2019/20 as the National Treasury is currently reviewing its bond switch auction programme. Treasury also said it remains committed to shortening the average maturity per auction for fixed-rate bonds.
The increase will be effective for the fixed-rate and inflation-linked bond auctions as of August 6 and August 16, 2019 respectively.
"The increase assessed multiple factors from the Eskom support, possible revenue shortfall and prefunding to meet commitments that might be mismatched to revenue flows," Treasury said in a statement.
"The frontloading of the financial support given to Eskom is in line with the President's announcement in the June State of the Nation Address. It is a partial early disbursement of the R230bn commitment announced in the Budget 2019, not additional support."
African News Agency (ANA)