T-Bills register highs in quick succession

Eyob Tekalign (Photo: Anteneh Aklilu)

The fund collected through the Treasury bills (T bills) market, one of the primary money market instruments, registered the second highest ever amount within less than two months.
On the auction held in June 2 under the platform of National Bank of Ethiopia (NBE), 15 billion birr has been collected from interested participants. It is the second highest fund mobilization in a single auction since the T bills was liberalized in December 2019 in to the competitive auction and free for interested players.
The first highest fund mobilization had happened in the auction held April 21. In the bi-monthly auction, participants sold bills worth of 15.746 billion birr in total with different maturity time and interest rates for the first time.
On the second auction, since April 21 which was on June 2, the second highest mobilization that is 15 billion birr has been collected from participants.
Since the auction re-launched late 2019 for competition, the market and resource mobilization has skyrocketed unlike the experience in the past and the interest rates have also become attractive. The number of investors including the private sector who show interest to participate on the auction has also increased, which has mainly involved public institutions and enterprises in the past.
The maturity has four different periods that is from 28 to 264 days. Since the T bill was introduced in new forms, the lowest amount resource collected was 100 million that was secured on the auction held June 17, 2020.
Eyob Tekalegn, State Minister of Finance, explained that the newly established auction has become promising from time to time to mobilize funds for the support of budget gap rather than using direct advance from NBE.
He told Capital that for the supplementary budget which was endorsed by parliament on Thursday, June 10, the line share will be covered by the bond secured from T bills rather than direct advance. “We are confident that the resource secured from T bills will cover for the gap on the supplementary budget,” he added.
He hoped that the budget deficit for the coming year budget will be mainly covered by the T bills, “we are suppose to reduce the direct advance.”
Economists argued that the direct advance, which is money printing pump to the market, from NBE, is very dangerous for the economy since it is one of the major reasons to ignite the inflation. They reminded that the country had incurred high inflation for over 15 years up to now since the government policy preferred to fill the budget deficit through direct advance with huge amount.
On the parliament session, the House of Representatives has approved 26.4 billion birr form supplementary budget for the 2020/21 budget year. Of which 14 billion birr is expected to be covered by the fund collected from T bills rather than direct advance, while 11.8 billion birr is covered by international partners.
Similarly, on the day, parliament has approved a proposal of 12.04 billion birr under financing restructuring for the required resource that was expected to be covered by international partners for the 2020/21 budget year but was not channeled as per the expectation.
The 12.04 billion birr will also be covered by the resource secured from the bond collected via the T bills market.
Funds collected through such tools, T bills, are typically used to meet short term financing for government expenditure and or sacking the excess money from the market to control the inflation.
According to NBE second quarter bulletin for the 2020/21 budget year, the share of direct advance dropped by 74.8 percent compared with last year due to its conversion to government bond, thereby increasing the share of bonds.