Thukten Zangpo

The government has issued Nu 27.2 billion (B) worth of Treasury Bills (T bill) and long-term bonds as of June 23 this year to raise funds, according to finance minister Namgay Tshering.

Responding to the Dewathang-Gomdar MP, Ugyen Dorji who asked for an update on T-bills and bonds sold by the government and their purpose, Lyonpo said that the T-bills are issued as part of the government’s temporary monetary measures, which have been practised by many other developed and developing countries globally.

“T-bills are issued as short-term cash management to finance the resource gap when the expenditure has to be met before receiving expected external grants or when there is projected domestic revenue collection to finance,” he said.

Lyonpo added that the Indian government has committed a total grant of Nu 45 billion (B) in the 12th Plan, however, the grant is disbursed on yearly basis as per their annual budget plan.

The government issued T-bills for a term of 1-4 months with an interest rate of 0.09 to 0.92 percent. After maturing, the T-bills are redeemed (use the proceeds from the maturing bill to buy another bill).

The government has issued Nu 19B worth T-bills as of June 23 this year.

By this month, Lyonpo said that T-bills would come to Nu 15.5B after Nu 3.5B would be redeemed from the World Bank’s grant.

Bonds were issued when the FIs have excess liquidity and there are no avenues of lending for business activities. The government issued a first-time bond in 2020 when the economic situation and economic activities were not doing well.

Lyonpo added that T-bills and bonds are usually subscribed by the Financial Institutions (FIs) from statutory liquidity ratio (SLR) as per the Royal Monetary Authority’s regulations and it would not soak up liquidity to meet private sectors’ demand.

SLR is a certain amount of reserve money the FIs need to keep in case the public wants their money back.

The FIs have to maintain 20 percent of total liabilities or deposits either in the cash or in government securities as mandated by the RMA’s regulation.

The government had raised Nu 8.2B from the bond’s term ranging from 3 years to 10 years of which Nu 7.5B was allocated to the National Resilience Fund and Nu 700 million (M) to National Cottage and Small Industry Bank Limited.

Lyonpo said that the government is in the process of converting Nu 4B T-bills into bonds, as requested by the FIs.