Govt to introduce Century, Green, Samurai & Panda bonds
By
Elorm Desewu
The
government is planning to introduce new bonds this year as a move to diversify
investor base.
As
part of the strategy, government will explore the possibility of issuing new
financing instruments such as Century bond, Green bond, Samurai bond and Panda
bond, among many others, to diversify the investor base.
This
part of the government debt strategy for the country over the medium term.
The
financing strategy for 2019 best responds to Government’s intention to
diversify the investor base and currency structure. The strategy also seeks to
continue the on-going liability management programme to manage the risks
embedded in the public debt portfolio and develop the domestic debt
market.
The
strategic risk benchmarks set out in the 2019-2022 MTDS are aimed at monitoring
and, ultimately, reducing foreign currency risk, interest rate risk, and
refinancing risk embedded in the public debt portfolio.
Accordingly,
the debt management strategy for 2019-2022 was formulated and clearly
articulated in the 2019 Budget Statement and Economic Policy, in line with the
Medium-Term Fiscal Framework.
The
debt management strategy was developed to propose financing for the 2019-2022
medium-term and intends to achieve the following specific objectives: meet
government’s funding needs on a timely basis and at a relatively lower cost
subject to prudent levels of risk; promote the development of efficient primary
and secondary markets; and pursue any other action considered to impact to
positively on the public debt stock.
The
strategy envisages the continuous issuance of medium-term bonds (especially
5-year bonds) and longer-dated bonds (7-year, 10-year & 15-year bonds) in
the domestic market over the strategy period.
The
strategy assumes a sovereign bond issue of up to US$3.0 billion on the ICM,
with proceeds of about US$2.0 billion to fund the budget and US$1.0 billion to
be used for liability management. The strategy also envisions the issuance of
domestic debt against possible contingent liabilities that may arise in 2019.
According
to the debt strategy, the management of refinancing risk will be pursued to
avoid bunching of debt service obligations and/or rollover risks, which may
lead to liquidity crisis and/or excessive increase in the cost of debt
servicing.
Over
the medium-term, the share of floating rate debt in total of external debt is
expected to be within a range of 15-20 percent, while the share of the entire
public debt portfolio facing interest rate resetting in a year is not expected
to be more than 30 percent.
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