The central bank raised Rwf19.75 billion in the last two years on behalf of government through the auctioning of six Treasury bonds, according to sources at the Capital Market Advisory Council (CMAC).

The Minister of Finance, John Rwangombwa, told Business Times yesterday that Government intends to issue more bonds to support the operations of the recently launched Rwanda Stock Exchange (RSE).

"We want to keep the market growing, we do not borrow only to finance our budget, we intend to issue more bonds as the others reach their maturity rate,” he said in a phone interview.

CMAC said in an email statement to Business Times, the Treasury bonds traded in the secondary market are worth 504,4million. To date, the bond market has transacted a total turnover of Rwf654 million.

Celestin Rwabukumba, the Operations Manager of CMAC says Government bonds serve as a benchmark for other issuers of corporate bonds and even for equity valuations as it provides a yield curve on which everyone bases on to price their securities.

"For RSE and the Capital market in general, that is what it does for us, it provides a benchmark for securities listed here and helps deepen our market for that matter,” said in an email.

Three government debt securities were actively traded, including two bonds with two year maturity dates which expired at the end of January 2010 with periodic interest of eight percent per annum as well as a three year treasury bond paying 8.25 percent per annum.

Government borrowing from the domestic market to finance the budget has been on an average of about two percent of GDP with more than one percent borrowed for cash flow purposes to avoid delays in implementation of Government programmes when donor support is not disbursed as programmed.

Rwangombwa said that government reduced domestic financing from Rwf70b to 12 billion this year.

The total outstanding government bonds are Rwf 11.5 billion and the BCR bond of Rwf 1 billion which makes it a total of Rwf 12.5 billion outstanding bonds.

Government pledged to keep this figure below 1 percent of GDP to allow liquidity in the banking system and create more room for private sector borrowing.

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