The Bhutanese Leading the way.
The Royal Monetary Authority (RMA) will be auctioning Nu 5.5 bn worth of Treasury Bills on behalf of the Ministry of Finance to mop up some funds from the market.
The RMA Governor Dasho Penjore said the RMA is facilitating the auction for the Ministry of Finance.
The Finance Minister Lyonpo Namgay Dorji said that of the Nu 5.5 bn around Nu 4 bn is being raised to pay back earlier T-Bills of Nu 2 bn a piece raised in the 2015-2016 financial year.
Earlier this month the RMA had floated Nu 4 bn in T-Bills for a period of 21 days which is now coming to a close.
The minister said that the additional Nu 1.5 bn is required for the June closing as a lot of payments would be made in this period.
“Though June closing has technically ended on 30th June there will still be a lot of bills coming in even after this period and so payments will have to be made,” the minister said.
Lyonpo said that T-Bills are a normal ‘ways and means’ financial exercise and is in fact a part of the budgetary process that happens every year.
He said this is because the revenue comes only at certain periods while the government has to keep making expenditures for its programs. He said T-Bills could in some ways be equivalent to the over draft facility taken by companies from banks.
In Bhutan T- Bills are normally issued for a maximum of 90 days or so.
T-Bills are like discounted government securities or debt instruments that can be bought for a discounted price and then sold back to the government for the full price.
Banks usually rush for the T-Bills because they are allowed to even use their mandatory deposits with the RMA which they normally would not get access to.
Of the Nu 5.5 bn T Bills Nu 3 bn is for 28 days, Nu 1.5 bn for 63 days and Nu 1 bn for 91 days.
The RMA Governor said, “Based on our recommendation to issue T-Bills on a regular or calendar basis instead of an ad hoc basis, the new T-Bills are being issued on a calendar basis.”
The Governor explained that on a calendar basis the amounts will be small as it will be spread out over a definite period and will attract more participants to compete for the discount rate.
He said for the RMA and the Financial Market the regular issue of T-Bills will help in establishing a yield curve which will serve as a benchmark for short term lending rates.
T-Bills can also be used by the RMA as part of its monetary tool measures to mop up excess liquidity.
Despite the public notification it is usually only the banks and financial institutions that participate in the auctions and buy T-
