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MALTA GOVERNMENT ISSUES €1.4BN IN STOCK IN 2020

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Copia-di-Copia-di-Copia-di-Copia-di-Copia-di-Copia-di-Copia-di-Copia-di-Copia-di-Copia-di-Copia-di-Copia-di-Copia-di-Copia-di-Copia-di-Copia-di-Copia-di-Copia-di-Copia-di-Copia-di-Copia-di-Copia-di-CoBy the end of January every year, the Treasury generally publishes its borrowing plan indicating the projected borrowing requirements of the Maltese government for that particular year. In January 2020, the Treasury had indicated that the total amount of issuance of Malta Government Stocks (MGS) during 2020 was not expected to exceed €450 million since the new bonds being issued were intended to finance the redemption of six MGS issues during 2020 amounting to €461.5 million.

However, as a result of the huge impact on government finances brought about by COVID-19, the government resorted to much higher borrowing levels to fund the various initiatives to provide assistance towards targeted sectors of the economy. This is very much in line with developments internationally where most governments resorted to huge levels of additional borrowings to shore up their economies decimated by the pandemic.

Shortly after the onset of COVID-19 and the various measures introduced, including the temporary closure of the airport, Malta’s finance minister presented a Bill in Parliament to amend the previous Budget Measures Implementation Act 2020 and increase the borrowing requirement to a maximum of €2 billion.

By the end of the year, the government issued a total of €1.4 billion in additional debt, including the issuance of a further €95 million in 62+ Government Savings Bonds. Apart from the subsidised bonds to pensioners, the Treasury tapped the primary market on six separate occasions with the new issuance each time structured via an auction aimed at institutional investors. All the auctions were very well-received with demand abundantly exceeding the available amount on offer on every occasion.

The statistics published by the Treasury indicate that local credit institutions were by far the buyers of the large majority of MGS available. This is not surprising given the very high levels of liquidity held by local credit institutions which continued to increase during the pandemic as deposits from retail customers surged. In fact, the latest data provided by the Central Bank of Malta as at the end of June 2020 shows that total deposits held by Maltese residents increased by €826 million during the first half of 2020.

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