South Africa plans to sell rand-denominated Islamic notes, increase domestic-debt issuance and speed up its bond-switch program to meet a wall of redemptions and plug the widening budget deficit over the next three years, the National Treasury said in its 2020 budget review.
These are the main features of the debt-management program:
- The government’s borrowing requirement increased to 407.3 billion rand ($26.8 billion) in the current fiscal year, compared with an estimate of 335.3 billion rand in the previous budget. It’s set to rise to 432.7 billion rand in fiscal year ending March 2021, 429.9 billion rand in 2022 and 497.5 billion rand in 2023.
- Domestic long-term bond issuance rose to 298.9 billion rand this year, compared with the previous estimate of 216 billion rand. Issuance is forecast at 337.7 billion rand next year, 337.4 billion rand in 2022 and 385.8 billion rand in 2023.
- Sales of Treasury bills will rise to 48 billion rand in the next fiscal year from 36 billion rand.
- Foreign issuance of $8.5 billion is targeted over the next three years.
- The government is preparing to sell a domestic Islamic bond in 2020-21, and is considering borrowing from multilateral institutions to finance infrastructure projects.
- To help manage redemptions of 266.4 billion rand over the next three years, the Treasury will “enhance” its program of switching short-term debt into longer-term bonds.
- To increase transparency on the size and timing of switch auctions, the Treasury will release a calendar for the transactions and set a maximum amount for each one.