The Nouvelleste | Towards an extension of treasury bills to other companies and individuals

From next October, the Bank of the Republic of Haiti (BRH) will expand treasury bills, Governor Jean Baden Dubois announced on Monday. “From now on we intend to expand the Treasuries, which means that we will allow other companies and individuals to have access to the Treasuries. Businesses and willing individuals will no longer be forced to deposit their money into a savings account where they will only receive a pittance of 0.25% interest. Now they will be able to invest in Treasury bills where they will benefit from an interest of 11.5% “.

According to the governor’s explanations, today only banks and financial institutions have access to Treasury bills. When you look at the revenues of banks and financial institutions, you will find a large percentage coming from Treasury bills. Based on this, the BRH encourages pension funds (ONA, EDH, etc.) to refrain from using term deposits from banking institutions offering between 6 and 7% interest or even less.

These savings and pension funds will now have more interest in turning to treasury bills, which will ensure a better return on investment for their beneficiaries upon retirement. Therefore, all individuals, institutions holding pension funds and others are advised by the head of the Haitian central bank to use BRH vouchers in order to guarantee a greater discount.

Objective: zero monetary financing

When treasury bonds are extended to the general public, it is a step in the right direction aimed at a better distribution of wealth in the country. So, instead of allowing banks and financial institutions to benefit from this windfall of 11.5% of Treasury bills alone, everyone will now have that chance through the official launch of this event which will take place on September 1, 2022. leadership of the BRH of the Ministry of Economy and Finance (MEF).

The other advantage of these bonds is that, instead of using monetary financing to meet its liquidity needs, the state will now have more financial means that it can use as loans to pay for its assets without jeopardizing a balanced budget. When authorities use monetary financing as usual to provide grants, this practice has direct impacts on the exchange rate and inflation. While if they have this possibility of resorting to loans from individuals or financial institutions, they will not create excess liquidity but will use liquidity that already exists in the system.

According to Jean Baden Dubois, who spoke last Monday at the BRH congress center, one of the controversial objectives targeted through these latest measures adopted in concert with the MEF is to gradually move towards zero monetary financing. The MEF is working hard to see if within the next three years the tax base can be increased so that monetary financing can approach zero.

Avoid the displacement effect

Giving his point of view on the issue, economist Etzer Emile believes this initiative is a good thing as it will allow for greater diversification of domestic state funding. When it is the monetary financing of the BRH that makes the state work, we can expect negative effects such as inflation and the relentless pressure on the dollar that this practice very often causes on the economy. A Treasury bill extended to other sectors will open up other means of domestic financing of the state which will have less impact on the market equilibrium, in particular at the level of prices and the exchange rate.

It (Enlarged Treasury Bond) also has the power to reduce the weight of foreign debt (foreign financing) in the national budget, continues the economic analyst, who points out that in all countries of the world governments issue bonds that any individual or company You can buy. While in Haiti, Treasury bills were still limited to commercial banks and other financial institutions. The other big problem hindered by Treasury bills, according to Etzer Emile, is that it was the MEF that managed them alone. This has led private companies to be very wary of the MEF’s repayment capacity.

The participation of the BRH in this initiative to expand Treasury bills constitutes a guarantee for institutions and private individuals, believes the economist professor, who now believes that it is up to the public authorities to make the bonds more attractive. Etzer Emile warns monetary authorities to make the business too profitable for banks. This risks provoking what he calls the “crowding-out effect” which consists in investing completely in Treasury bonds by banks and neglecting credit to individuals.

Cyprien L. Gary

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