State Treasury's new borrowing agenda

The Finance Ministry is planning to attract 5,100bn ROL from commercial banks this month, mostly in short-term (up to one year) loans, by issues of T-bills. The ministry hopes to get 1,500bn ROL for the longer term, i.e. two or three years. It will be interesting to see the interest policy to be applied by the ministry this month and the banks’ response, considering the Finance Ministry in July did not manage to attract even half of what it had set out to. The three-year bonds have been a “symbolic” instrument kept by the Finance Ministry in its portfolio for more than two months now, although it keeps rejecting bids from banks, as they demand higher interests. The same goes for the two-year bonds, with the bids submitted during the last two auctions rejected, as well. In fact, the Finance Ministry keeps applying a policy by which it persists in rejecting any increase in interests above 14.55% for two years and 13.9% for three years, practically leaving NBR to battle out the liquidity on the monetary market. For over two months, the National Bank has been paying 18.25% interest for one-month deposits on the average, which the banks find acceptable. ZF