The liquidity in the economy remained in surplus during the April-June quarter, in the aftermath of demonetisation, but the cash position of the government was “somewhat stressed” due to a mismatch in receipt and payment. The quarterly public debt management report by the department of economic affairs, released on Friday, says: “Due to front-loading of expenditure by the ministries and heavy repayment of G-secs falling during the quarter, combined with low cash inflows generally seen during the first half of the year, the cash position of the government during Q1 of FY18 was somewhat stressed and it took recourse to WMA (Ways and Means Advances) from the RBI to tide over this temporary phase. Overdraft was also availed briefly during the quarter.”
The date of the annual Budget was advanced for the first time to February 1 this year, so funds to various departments were to be released early to enable them to start spending in a meaningful way from April itself. This was a key reason for the temporary cash crunch in the first quarter itself,
analysts said. To tide over the mismatch in cash flows, cash management bills (CMBs) of varying durations amounting to Rs 1,30,000 crore were issued during the first quarter. CMBs of Rs 40,000 crore were redeemed but an attempt was made to time expenditure as per receipt trends, the report says.
The report said the weighted average maturity (WAM) and weighted average yield (WAY) of the G-Sec issuance made during the first quarter was 14.92 years and 7.01%, respectively. During the first quarter of this fiscal, the government issued dated securities worth Rs 1,68,000 crore (29% of the budget estimate), higher than the Rs 1,65,000 crore (28.4% of BE) a year before. Internal debt constituted 93% of public debt as of June 30, while marketable securities accounted for 83.2% of public debt. About 26.6% of outstanding stock has a residual maturity of up to five years as of June-end and 5.3% of outstanding stock will mature every year over the next five years, which implies that rollover risk in the debt portfolio continues to be low, according to the report.
G-Sec yields saw a volatile trend during the first quarter but yields softened towards the end of the quarter. Yields hardened during April due to factors, including cautious mood ahead of the first bi-monthly monetary policy of RBI for 2017-18 which maintained a hawkish stance and RBI deciding to maintain the status quo on its key policy rates.