Budget 2023
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No new debt issuance to fund deficit

Cape Town - The government will not issue new bonds or increase the size of its weekly government debt auctions despite an increased borrowing need for the fiscal year to end-March, the Treasury said on Tuesday.

In its three-year budget outlook, the Treasury projected a shortfall of R166.6bn from R157.9bn initially forecast in February.

The Treasury said it would finance the gap by switching maturing bonds to longer-dated paper and drawing on government’s available cash balances.
 
Issuance was increased in inflation-linked bonds and Treasury bills about three weeks ago, and markets were expecting a further increase.
 
Borrowing to finance the 2012/13 fiscal year increases to R181.2bn from R161.7bn previously projected, before coming down to R175.6bn in 2013/14, still higher than the R148.7bn seen in February.
 
The market was already pricing in increased supply in the longer end of the government yield curve, especially the 2031 and 2041 bonds, which Treasury tends to use as funding stock.

Recent auctions of the 2041 bonds have attracted little demand as the market fretted about over-supply in that area.
 
The yield spread between the 2015 and 2026 bonds was at record highs above 170 basis points last week, on expectations of increased supply.

South Africa’s government bonds have continued to attract decent demand, partly due to South Africa’s prudent fiscal policy.

The Treasury said it expected debt-service costs to stabilise as a percentage of gross domestic product by 2014/15, projected at R76.9bn for the current fiscal year. State debt cost is the fastest-growing component of expenditure, followed by economic infrastructure (transport, communications and energy).

The Treasury said there were no changes to its February plans to borrow $1bn a year in international markets for the next three years.
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