YESTERDAY, THE CENTRAL Bank of Liberia (CBL) announced that at the request of the Ministry of Finance (MOF), it has commenced the issuance of Government of Liberia (GOL) Treasuries bills (T-Bills). According to a CBL statement this historical event occurred on Thursday May 2, 2013 at the CBL Training Center.
THE CENTRAL BANK also noted that in attendance and participation in the bidding process were treasury officials from various commercial banks. The CBL further noted that over two years ago, with the assistance of the International Monetary Fund (IMF) the rules and regulations governing the issuance of T-Bills were drafted and the staff of the Treasury Section of the CBL underwent a study tour in Ghana in preparation of the successful implementation of the program.
THIS INITIAL OFFERING of 91-day T-Bills is due to mature on August 1, 2013. The auction result indicates an oversubscription of 100 percent of the amount offered, in short, a good sign that the GOL T-Bills program is moving in the right direction. Stressing the importance of what is a Treasury Bill or T-Bill, the CBL statement said it is a short-term debt obligation backed by a sovereign government with a maturity of less than one year.
T-BILLS ARE ISSUED through a competitive bidding process at a discount from a par, which means that rather than paying fixed interest payments like conventional bonds, the appreciation of the bond provides the return to the holder. The CBL said the decision to commence the implementation of the GOL T-Bill program is influenced by the unanticipated benefits to the macro economy.
T-BILLS IMPROVE FINANCIAL intermediation by expanding and creating alternative investment instrument for individual and institutional investors. On a benchmark pricing, treasuries have the necessary characteristics to create a “true” credit risk-free yield and relative to funding and that T-Bills are an indispensable money market instrument and are used as collateral in interbank lending, the CBL said.
THE T-BILL PROGRAM could enhance the profitability of the commercial banks, given that all of the commercial banks have excess Liberian dollar liquidity and the introduction of T-Bills will also provide the CBL with an additional tool through which monetary policy can be effected. The introduction of the T-Bill program will lead to the establishment of a liquid government bond market that will serve as a benchmark for the corporate debt security market and encourage the development of skills relating to fixed income securities and broaden the spectrum of financial services in Liberia.
WITH ALL THESE explanations, it is no secret that the introduction of Treasury Bills is a new thing to the Liberian economy. However the T-Bill program should be looked at in the larger context of its potential stimulating and stabilizing role in the economy which is likely to out-weight the minimal cost to the government.
BUT TO MAKE this work, the CBL and its Treasury Bill Department should now embark on the task of educating the public as to what constitutes the full potential of this program and the large economy can grow and the citizenry benefit. Such an exercise should be conducted in the form of public awareness either through series of out-door programs, radio announcements or newspaper clippings.
THIS WILL UNDOUBTEDLY stimulate people’s understanding of the process since the program is relatively new to Liberians. It is indeed factual that only awared society can be encouraged to fully participate in this program. Thus the challenge to the CBL is to carry awareness on the issuance of T- Bills or else our society being what it is will soon start misinterpreting the true intent of the program.