Overview

Under Section 13 of the Stocks, Bonds and Treasury Bills Act of 2006 (Cap 56:07) the Bank of Botswana is the sole agent for Government in the issuance of bonds and related securities. The Bank, through the Financial Markets Department, is therefore responsible for appointing primary dealers and for conducting auctions of Government bonds in amounts and maturities determined by the Government. The Bank and the appointed Primary Dealers enter into an agreement (the Primary Dealer Agreement) that outlines, among others: auction processes, mechanisms and rules; guidelines for appointing such dealers; their role or obligations; their rights; conditions for their suspension or termination; etc.

Also in its capacity as the agent for the Government, the Bank appoints and enters into an agreement with institutions that are prepared to accept and comply with the rules established by the Bank regarding the role of custodians, transfer and settlement agents. This is meant to ensure that the ownership of Government bonds is protected, including the accurate and timely recording of any transfers; and that settlement of payments is effected on time in order to develop a secure and robust market in such debt instruments. The agreement outlines, among others: the obligations of agents; criteria for determining an agent; the role of agents in the settlement and transfer of notes; the sub-custodian agreement between an agent and its client; etc.

Upon issuing the Bond, prior to the auction, the Bank prepares a prospectus describing the instrument (the Bond or Treasury Bill), the coupon rate if any, the maturity of the instrument, etc. After the auction, the auction results are published, including on this website.

History

Due to many years of sustained, substantial budget surpluses that commenced in the early 1980s, the Botswana Government had no need to borrow in order to finance public expenditure programmes. Thus, the market for domestic government bonds was dormant. However, recognising that this could undermine broader capital market development, in March 2003 the Government initiated a limited series of bond issues in order to establish a risk-free yield curve that would, in turn, facilitate wider bond issuance both by parastatals and the private sector. In total, P2.5 billion was issued under three separate bonds with maturities ranging from 2 to 12 years.

Recent developments

Commencing March 2008, the Government commenced a new Note Programme that provided for the issuance of up to P5 billion of additional domestic government debt. Again, while this coincided with a period when the government budget was about to move into substantial deficit owing to the global economic crisis, this new programme was primarily aimed at supporting market development rather than government borrowing. It also helped alleviate the cost to the Bank of Botswana of absorbing surplus liquidity in the economy. As well as additional bonds, the programme has included the issuance of six-month treasury bills. As of March 2010, the amount of outstanding debt under the programme was P4.5 billion.

The global economic slowdown that commenced in 2008 and the resulting impact on the Botswana economy resulted in the Government budget entering into a period of sutained and substantial budget deficits. The 2010 Budget Speech indicated that in order to help finance these deficits an updated bond issuance programme would be presented to Parliament for approval in mid-2010.  

Access further information on:

• Primary Dealer Agreement
• Bond issuance programmes
• Auction results
• Market statistics