1 Overview of SA’s debt management process Tebogo

Transcript:1 Overview of SA’s debt management process Tebogo:
1 Overview of SA’s debt management process Tebogo Mosepele Director: Growth Table of contents 1) Background 2) History of South Africa’s Bond Market 2 3) Funding Strategy and Instruments 4) Primary auctions 5) Foreign bond issuance Background Then: Debt sustainability issues dates back to the 1990s when majority of Low Income and Developing Countries (LIDCs) faced tough economic challenges This required long-term policy changes, often accompanied by the need for debt relief or cancellation (HIPC, MDRI). These initiatives were aimed at assisting indebted countries to achieve development goals by redirecting public resources into poverty reducing and job creating expenditure In 2005, IMF, World Bank and official lenders agreed to a Debt Sustainability Framework (DSF), supported by a Debt Sustainability Analysis (DSA) Now: In response to the financial crisis, developing countries increased borrowing, spurred by record low borrowing costs Economic landscape has changed and advanced economies have started with monetary policy normalisation, which is likely to raise borrowing costs Debt levels in many developing countries have remained elevated Some LIDCs are already defaulting or are close to defaulting on their debt commitments There is a persistent challenge in public finance management, especially for LIDCs; the balance between debt sustainability and raising funds to finance public investment requirements 3 4 Brief history of South African domestic bond market No active secondary market during this period A new bond issued for every funding requirement Government faced refinancing problems due to debt stand still The prescribed Asset Requirement abolished in 1989 Establishment of the Bond Exchange(BESA) of South Africa in 1996 Bond Market Association a voluntary association by bond trading firms became formalized Appointment of Primary Dealers in government bonds STRATE (Central Securities Depository) established in 1998 Financial Markets Act launched in 2011, which replaced Securities Services Act of 2004 JSE acquired BESA in 2009 Currently, National Treasury is working on launching Electricity Trading Platform (ETP) for government bonds Pre-1998 Post-1998 Key stakeholders in domestic bond market National Treasury (NT) Financing of budget deficit Develop the bond markets Develop the yield curve and create benchmarks South African Reserve Bank (SARB) Conduct auctions on behalf of NT Johannesburg Stock exchange (JSE) Listing of bonds Trading platform Terms and conditions Offering circular Debt sponsors SENS announcements STRATE Bond settlements Primary Dealers Participate in government auctions Buy bonds in the auctions and sell it in the secondary market Financial Services Board Market regulation 5 Primary Dealership System