Tunis/Tunisia — Subscription to the second tranche of the 2023 National Bond issue, whose amount is set at 700 million dinars (MD), will start on Monday, May 8, 2023.
For the third consecutive year, Tunisia is issuing national bonds as a mechanism to finance the state budget, given the difficulty for the country to borrow from the international financial markets due to the delay in the approval of the agreement with the IMF under the Extended Fund Facility (EFF), amounting to about 1.9 billion dollars, despite the staff-level agreement reached with Tunisia on October 15, 2022.
Financial analyst, Bassem Ennaifer, told TAP the issuance of bonds by the state aims to diversify the sources of financing the budget.
"The government seeks to raise amount of TND 2.8 billion dinars for the whole year 2023 through the issuance of national bonds, compared to about TND 2.994 billion in the previous year and TND 1,806 in 2021.
Ennaifer estimated that the subscription of the second tranche of the national bond issue would exceed the planned target (700 MD), given the preparations made for this purpose by the Ministry of Finance and financial institutions such as banks, insurance companies and stock market brokers.
As a reminder, in February 2023, Tunisia managed to mobilise an amount of TND 715 million, as the first tranche of the 2023 national bond issue, thus exceeding the planned target, which was also set at 700 MD.
The Minister of Finance, on April 20, published in Official Journal of the Tunisian Republic (JORT) No. 40 the specifics and conditions of the issuance of the second tranche of the 2023 national bond.
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Subscription to this tranche will start on May 8, 2023 and run until May 17, with the possibility of closing or extending the subscription before this date.
Subscription to the National Bond Issue is possible according to the subscriber's choice in three categories:
Category "A" with a nominal value per security of 10 dinars, category "B" with a nominal value per security of 100 dinars and a repayment period of 7 years, while category "C" has a nominal value per security of 100 dinars and a repayment period of 10 years.
The interest rates for these three categories are 9.75% per annum, 9.80% and 9.95% per annum respectively.
Ennaifer stressed that even if the mechanism of assimilated treasury bonds (BTA) remains useful, banks prefer the subscription of bond loans given "their profitability, especially thanks to the interest rates applied to that kind of subscription."
He explained that the State generally does not issue long-term bonds, but rather carries out exchange auctions by issuing new assimilated treasury bonds to buy back the old ones.
As far as the banks are concerned, he pointed out that participating in the bond subscription process allows them to recover their money better than in the case of treasury bill purchases, thus avoiding lengthy procedures. This approach gives them flexibility in their management methods.
In terms of financial profitability, he stressed that subscribing to domestic bonds is better for banks than subscribing to corporate bonds.
He said: "As long as the grace period for subscribing to domestic bonds is long (up to 10 years), the return for the subscriber will be higher, which will allow banks to make large profits."
