JOHANNESBURG, March 24 (Reuters) – South Africa will decrease the amount of debt on sale at its weekly long term and inflation-linked bond auctions by 2.6 billion rand ($175 million) as of next week following better-than-expected revenue collection in 2020.
“The fixed-rate government bond auction amount will be decreased by nominal R1,800 million from R6,600 million to R4,800 million, effective from auction to be conducted on 30 March 2021,” the National Treasury said in a market announcement late on Tuesday.
The weekly amount of inflation-linked bonds on offer would be reduced to 1.2 billion from 2 billion previously, said treasury. The fixed-rate non-competitive bond auction amount will be 50% of the new auction levels.
In May last year, at the height of the COVID-19 pandemic, treasury upped weekly auctions by nearly 2 billion rand to cover a budget deficit seen increasing sharply due to the coronavirus stimulus package announced by President Cyril Ramaphosa.
Government also raised $5.6 billion through loans from international lenders like the International Monetary Fund (IMF) and others.
The budget in February, however, showed revenue collections had outpaced projections by around 100 billion rand, especially towards the end of 2020 as booming global commodity prices lifted mining activity.
National Treasury said it would use the resulting increase in government’s cash balances to reduce borrowing level.
In February the treasury’s head of debt said the department was concerned about “concentration risk” and a banking sector squeeze.
Most of the new debt issued was short-dated instruments, bought up largely by local banks and asset managers hungry for liquid and high rated bonds to use as a buffer against pandemic related losses.
($1 = 14.8685 rand) (Reporting by Mfuneko Toyana; Editing by Toby Chopra)