Government lifts bond sale programme by $1.5 bln

Government lifts bond sale programme by $1.5 bln in face of bigger deficit

By Paul McBeth

March 30 (BusinessDesk) – The government will boost this year’s bond sales by $1.5 billion as it deals with a cash deficit that could be as big as 9% of the economy.

The New Zealand Debt Management Office has lifted its borrowing programme to a maximum of $15 billion in the 2010/2011 financial year, having already sold $13.2 billion of the $13.5 billion programme announced in December. That comes as the government looks to plug the hole in its balance sheet caused by last month’s 6.3 magnitude earthquake, which is estimated to have killed more than 180 people and caused as much as $15 billion of damage.

The country was already facing a structural cash deficit of 5% of gross domestic product, prompting the International Monetary Fund to recommend a scaling back of so-called middle-class welfare packages such as Working for Families, interest-free student loans, and KiwiSaver incentives. The IMF is picking New Zealand’s economy will grow just 1% this calendar year.

In December, the government ramped up its bond programme by $1 billion to $13.5 billion in a bid to head off looming deficits, and brought forward $10 billion worth of issuance to the 2012/13 year from 2014/15. That increased the government’s forecast peak in net debt by one percentage point to 28.5% of GDP.

Finance Minister Bill English had indicated the government will borrow to initially fund the rebuild of Christchurch, and claw that back through spending cuts. Yesterday, he warned public servants more cuts were on the way.

The NZDMO will provide another update on its bond programme in the government budget in May.

(BusinessDesk)

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