YANGON, Jan 2 (Reuters) - Myanmar will formalise sales of government debt via an auction system in Yangon this month, a central bank official said on Friday, the latest move to boost overstretched state coffers and reform the country’s fledgling economy.
“Government treasury bonds will be auctioned electronically there (Yangon) among local private banks in the beginning and in the bigger market later,” Set Aung, the deputy central bank governor, told Reuters.
He said interest rates on treasury bonds were fixed at present, but when the market is opened - tentatively on Jan. 28 - bond prices would be floating and dependent on supply and demand, interest rates and market trends.
The central bank started issuing three-year and five-year bonds through state-owned banks in 1993, with the intention to promote public savings. Two-year bonds were introduced in 2010, a year before a new government came to power and brought in international experts to help reform an economy that wilted under 49 years of army dictatorship.
Interest rates on treasury bonds are presently 8.75 percent for two-year maturities, 9.0 percent for three-year and 9.5 percent for five-year terms, respectively.
There are four state-owned and 23 local private banks in the country while nine foreign banks were granted limited operation licences last year. A stock market is scheduled to be operational later in 2015.
“This is a positive step forward in the financial reforms in the country. We welcome it but have to wait and see how it will come off,” said U Htwe, a senior official at United Amara Bank.
The central bank has so far issued a total of 65.4 billion kyat ($63.8 million) worth of five-year bonds, 23.9 billion kyat in three-year bonds and 5.55 billion kyat in two-year bonds. (Editing by Martin Petty and Jacqueline Wong)