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Sierra Leone News: Interest paid on treasury securities in 2017 skyrockets over Le394bn

The Public Debt Management Division of the Ministry of Finance has stated that interest paid on treasury securities for the year 2017 amounted to Le535.28 billion compared to the Le140.75billion paid in 2016. According to the published Bulletin, it however indicates a huge increase of Le394.32 billion, equivalent to a growth of 280% over one year. “The huge interest payments in 2017 were on account of rising borrowing appetite by Government, resulting in higher yields on treasury Securities. Interest payments on 364-day Treasury Bills rose to Le488.20 billion in 2017, up from Le74.82 billion in 2016,” it said. In 2017, in other words, the Government increased its borrowing on 364-day Treasury Bills Le413.38 over 2016. Treasury Bills are short-term government borrowing instruments introduced in 1964 with a 91-day term to maturity. As investment assets they are sold by auction in weekly lots with tap issues to Discount House, banks and other public agencies. Minister of Finance, Jacob Jusu Saffa, said that the purpose of publishing the Annual Public Debt Management Bulletin is to provide information on government debt management operations with respect to the country’s debt stock, debt service payments, composition and structure of external and domestic debts, risks in the existing debt portfolio, developments in the domestic debt market and the overall public debt management landscape. On interest payments by Market Segment, total interest paid on Marketable Treasury Bills amounted to Le463.38 billion in 2017 whilst the Non-Marketable Treasury Bills amounted to Le71.51 billion. The interest paid on Market and Non-Marketable Treasury Bills alone amounted to Le460.78 billion, indicating a huge change of 462.41% when compared to 2016 interest payments of Le81.93 billion. The total interest paid on treasury Bonds and ways and Means Advances for 2017 were Le71.52 billion and Le12.42 billion, respectively. Also, interest paid on the 1-year-Treasury Bonds Securities amounted to Le59.09 billion, an increase of 17.29% when compared to its 2016 position of Le50.38 billion. According to the Bank of Sierra Leone, government securities were introduced in 1993 with a 12-month term to maturity. They are issued in the primary market at face value in monthly auctions. Since interest payments are made quarterly, four interest coupons are attached to the TBB certificates, which are presented on maturity to the commercial banks for interest payment. Commercial banks and Discount House participate in the primary market as agents through which customers bid for Treasury Bearer Bonds. The interest rate on movements on domestic debt 2017, all yields in the marketable instruments recorded a steady upward trend during the period under review (January to December 2017). The average annual yield on the 91, 182 and 364-day securities for 2017 were 9.97, 13.14 and 23.97%, respectively. When compared with their annual average positions in 2016 of 6.26, 10.68, 21.44%, there was an increase of 3.71, 2.46 and 2.52 percentages, respectively. However, the highest yield in the 91-day Treasury Bills was in July 2017, with an average of 11.46%, starting with an average rate of 8.57% in January 2017. In the 182-day, the highest yield was recorded in January 2017 at 15.68%. The 364-day Treasury Bills recorded its highest yield of 29.29% in February 2017. Treasury bills are issued through commercial banks and Discount Houses as primary market dealers, on a discount basis – that is, they are sold originally at a price below their face value, with face value payable at maturity. The difference between the price and face value constitutes the interest payment. Treasury bills remain an important financial instrument with a significant role in monetary management.

ZJ/9/1/19

By Zainab Iyamide Joaque

Thursday January 10, 2019.

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