T-Bills continue to mushroom

The volume collected through Treasury Bills (T-bills) mushrooms in the past fiscal year. Since the market determined T-bills auction was introduced government has commenced a one year maturity in the year.
It was recalled that late 2019 the government had introduced bimonthly market determined rate T-bills auction that took place at the National Bank of Ethiopia (NBE) on the aim to attract more players and avoid direct advance it received from the central government.
On the 2020/21 fiscal year that ended on June 30, the net issuance of T-bills with different maturity was about 97.2 billion birr that makes the total outstanding to 121 billion birr.
The debt analysis of the Ministry of Finance stated that the participation of government and private owned commercial banks on the T-bills market showed an improvement compared to the previous quarters and last year. It reminded that T-bills with a maturity of 364 days was introduced and showed improvement in the last three quarters.
The average yield for Treasury bills, which is negotiable securities issued by the government mainly in short term obligations, of 28 days, 91 days, 182 days and 364 days has increased compared to last year same period.
From the total public sector outstanding domestic debt the share of T-bills instrument has also increased since it started on the new scheme and has stood at 10.6 percent at the 2020/21 fiscal year.
At the same time, the share of T-bills for the GDP has stood at 2.54 percent. The main objective of government in introducing the competitive auction on the T-bills was to drop the direct advance and mobilize the resource from potential actors like financial sector and other big investors for the demand it fulfills in developmental projects and also to control the inflation by sacking excess money from the market.
While direct advance for the year has shown slight increment compared with the preceding year but it is still significantly lower compared with the behavior before the economic and political reform that was emplaced about three years ago.
The reason for the sharp drop for direct advance is government’s replacement with treasury bills.
For the year, the direct advance that central government received from NBE is 83.5 billion birr that has a share of 7.32 percent from the total public sector outstanding domestic debt for the 2020/21 fiscal year.
The direct advance share for the total outstanding domestic debt was close to quarter in 2016/17, 2017/18 or 2018/19 fiscal years, which indicated that since the new market based T-bills auction was introduced, it played a major role to reduce the volume that the government secured from direct advance.
In the 2019/20 fiscal year, the government accessed only 31 billion birr, which was 3.4 percent of the total outstanding domestic debt, through direct advance.
Before the introduction of market determined T-bills auction, the stock of old Treasury Bills which was 149.3 billion birr as at December 4, 2019 was converted into the newly introduced treasury notes.
The stock of direct advance which was 192.2 billion birr was also converted into long term bond as of July 7, 2019.

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