T-bills’ triumph closes financial loopholes

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The market determined treasury bills (TBills) has continued to mushroom leading to the expansion of the stock to 58.9 billion birr as of the end of the first half of the budget year.
The National Bank of Ethiopia (NBE) that introduced the market determined TBills in December 2019 has also commenced the bills with maturity of 364 days in the second quarter of the 2020/21 financial year.
The latest Public Sector Debt Statistical Bulletin of the Ministry of Finance (MoF) indicated that during the first six months of the financial year, net issuance of TBills with different maturity was about 35.22 billion birr.
MoF under its bulletin said that participation of government and private owned commercial banks on the TBills market shows an improvement compared to the previous two quarters.
It has been disclosed that the government reintroduced the TBills under market determined approach on the financial sector reform.
MoF had also indicated that it will use the resource to fill the budget deficit by reducing direct advance from NBE. It added that reducing direct advance, which is also known as money print, contribute to control the inflation.
Under its first and second review of the Extended Credit Facility and Extended Fund Facility the International Monetary Fund (IMF) early this week has stated that the financial sector reforms have progressed, with the development of a treasury bill market reducing the need for monetary financing of the budget.
Under the newly introduced TBills with maturity of 364 days that commenced in October 2020 about 3.38 billion birr accepted in the times, while the offered was 9.9 billion birr.
From the total outstanding 974.7 billion birr public sector domestic debt as of December 31, the TBills share is 58.94 billion birr of over six percent from the total share. This was 2.59 percent in the past financial year.
In the stated period, the country service was USD 991 million for international creditors. Of which the central government share was USD 143 million. Out the total public sector external debt service during the last six months, USD 847.73 million was made by SOEs, while from this the share of non-government guaranteed debt service (Ethiopian Airlines and Ethio Telecom settled) was USD 367.9 million.
Under Debt Service Suspension Initiative (DSSI) that the G20 countries agreed to support eligible countries to suspend service to mitigate the impact on vulnerable economic from of COVID 19 Ethiopia has benefited.
“Currently we are not making any external debt service payment for our Bilateral Creditors of Central governments as per the G20 DSSI,” the MoF bulletin said.
“During the period (July 1 ,2020 – December 31 ,2020) as an eligible country of DSSI initiative, has suspended the external debt service payment of central government to its bilateral creditors which amounted to USD 96.52 Million which was about USD 14.9 million for the period May 1, 2020 – June 30,2020,” it added.
Ethiopia is also eligible for the grant assistance under Catastrophe Containment and Relief Trust (CCRT) of IMF.
Based on the November 2020 G20 communiqué on Common Framework (CF), a discussion is currently been undergoing with different development partners.
Under its review, the IMF backed Ethiopia’s plan to rework its debt under the Group of 20 common frameworks as it reached a staff-level agreement with the government on credit facilities. “To strengthen debt sustainability, the authorities aim to lower the risk of debt distress rating to moderate by re-profiling debt service obligations,” it said on its review statement.
During the last six months new external loan agreements signed by Central government with IDA, Italy and Dansk SK.B amounted to USD 333.87 million, and as per the non-concessional borrowing limit there was no non-concessional borrowing except Ethiopian Airlines, which signed agreements with its commercial creditors’ that amounted to USD 326.02 million.
Total External Public debt disbursement during the last six months was USD 900.11 million.
Total Public Sector Debt stock as of December 31, 2020 stood at USD 54.5 billion, compared to the revised June 30, 2020, debt stock which was USD 55 million.
Out of the total public sector debt, as at December 31, 2020, total external debt amounted to USD 29. 7 billion compared to June 30, 2020 USD 28.86 million. The increment in External Total Public Debt compared to June 30, 2020 is relatively higher which can be partly explained by exchange rate variation of USD, a relatively higher depreciation of USD specially against SDR and EUR.