Finance minister Enoch Godongwana delivering his first Medium-term budget policy speech. Picture: Phando Jikelo, ANA.
Finance minister Enoch Godongwana delivering his first Medium-term budget policy speech. Picture: Phando Jikelo, ANA.

National Treasury will reduce debt issuance relative to 2020/21 outcome due to better than expected revenue

By Helmo Preuss Time of article published Nov 11, 2021

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Better than expected revenue has allowed the Treasury to reduce expected debt issuance relative to the 2020/21 outcome.

The main difference between the February 2020 Budget and the November 2021 Medium Term Budget Policy Statement (MTBPS) is that net domestic short-term debt issuance has been drastically reduced. No net issuance of Treasury bills is expected in fiscal 2021/22 compared with the 2020/21 outcome issuance of a net R95.3 billion.

In future years, net domestic short-term debt issuance averages just above R50 billion, with R54 billion forecast for 2022/23, R53 billion in 2023/24 and R52 billion in 2024/25.

It expects to cut its issuance of domestic long-term bonds by almost half as net issuance is projected to fall to R285.3 billion in 2021/22 from R523.4 billion in 2020/21. It then rises to R381.8 billion in 2022/23.

In 2020/21, retail savings bonds aimed at the individual raised R7.6 billion compared with R3.6 billion in the previous fiscal year. This increase in Treasury’s view reflected the sound value proposition offered by retail savings bonds, as in most cases, retail bonds offer a higher investment return than fixed deposits at commercial banks. This is because the savings bonds are priced off capital market yields rather than money market yields.

In 2020/21, capital market yields rose substantially compared with the previous year. As demand was concentrated in shorter-dated debt, the government adjusted its issuance strategy by issuing more bonds in the short-to-medium term, lowering its average borrowing costs.

It now says that because borrowing costs remain higher than pre-pandemic levels, it will issue 77% of the long-term fixed rate bonds in the three- to 16-year maturity area.

Financial distress amongst consumers has seen a rise in the amount of penalties raised from early redemption of retail savings bonds. The amount of penalties jumped to R426 million in October from R193 million in September and only R93 million in April. This is a useful and timely measure of how distressed consumers are. In the first seven months of the fiscal year, penalties totalled.


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