Financial market: an operation with the taste of failure

• 10 billion FCFA raised out of the 30 sought

• That is a coverage rate of 35.87%.

• Burkinabè investors save the day

LWill Burkina go through with the operation? This is the question we asked ourselves when the country announced an issue on the financial market on March 15th. After two loan deferrals, this time was the right one. The operation was carried out from start to finish.

The country was looking for 30 billion FCFA, through an issue of Treasury Bonds and Equivalent Bonds with an initial maturity of 182 days and 3 years. If no report is to report, this operation leaves a taste of failure in the mouth.

This money that Burkina sought via the regional financial market was to cover the financing needs of the State budget. Basically, the 30 billion FCFA would be used in the current expenditure of the country.

The March 15 issue of Treasury bills and similar bonds represented the country’s second intervention on the 182-day maturity and the first intervention on the 3-year maturity in 2023.

Are investors sulking

The first feeling of failure of this release comes from the number of participants in the show. They were 3 investors to position themselves to lend us money. In addition, the total amount of bids stands at 4.560 million FCFA. This is also the sum retained for the Bonds assimilable du Trésor (BAT). This type of broadcast offers several advantages. Equivalent Treasury bonds offer a short-term investment meeting cash management requirements combining security and quality, with known remuneration paid in advance to the investor, when the securities are acquired, etc.

With regard to Treasury Bonds (OAT), it is often the operation preferred by investors, there too, the enthusiasm is weak. 5 participants presented themselves and offered the country the sum of 6.200 billion FCFA, a sum that Burkina retained.

Thus, out of the 30 billion FCFA initially sought, the country was able to garner 10.760 million FCFA, i.e. a coverage rate of 35.87%. In terms of comparison, on its issue of February 15, where it was also looking for 30 billion FCFA, Burkina found itself with a coverage rate of 99.77% (i.e. 29.931 billion FCFA obtained on the regional market).

The second point to note is the absence of foreign investors on this Burkina Faso issue. Has the Burkina Faso signature lost its quality? In the report of the operation, posted on the Umoa-Titres website, the proposals emanate from Burkina Faso for the two types of emissions. And even there, investors could not offer the country the desired amount. When we know that the banks are often the first to invest in a country’s emissions, we are entitled to ask ourselves questions about this timidity.

Cash needs?

In early January 2023, Burkina raised 173 billion on the Umoa regional market, through a public call for savings. The country was looking for 150 billion FCFA. At the closing of the operation, the Minister of Economy and Finance, Aboubakar Nacanabo, affirmed that the coverage rate of 115.33% “reflects real enthusiasm from investors”. Following this fundraising, the simultaneous issues of February 15 came to bail out the Treasury coffers. And since then, nothing. After two postponements, the country returns to the financial market, without great results. Meanwhile, the country has requisitioned 500 kg of gold from two mining companies. An exceptional measure that raises questions about the country’s liquidity needs. Especially since the next fall of the country is scheduled for March 2023.

This means that in this month of March, Burkina Faso will have to pay part of its debt that it borrows on the financial market. 25.33 billion FCFA. This is the amount due as debt service.

Debt service is the amount paid for a given period by a borrower to remunerate the lenders (ie pay the interest) and repay the part of the principal coming due. For this first quarter of the year alone, the amount of debts owed by Burkina amounts to 118 billion FCFA, on a borrowing forecast of 120 billion FCFA. According to the schedule of issues published by UMOA-Titres, this year, Burkina intends to borrow 630 billion FCFA on the financial market. The total falls for this year amounted to 437 billion, representing a net mobilization of 193 billion FCFA. Still according to this calendar, on March 29, the country will once again be on the financial market. In search of 30 billion FCFA. o

NK

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