1. GoK has instructed parastatals to transfer ownership of all the t-bonds they hold to GoK. Debtor asking Creditor to transfer all debt to it. This effectively = forced debt cancellation.
2. Some would ask - what is the problem? government borrowed from itself in the first place & that is now being reversed. Well, it is complicated.
3. You see, when parastatals bought these t-bonds, they paid GoK. So GoK has already spent this money. Kwisha, that money has been spent!
4. In the absence of a 3rd re discounter (market is illiquid), these t-bonds can only be rediscounted at CBK (the guarantor & lender of last resort of GoK)- meaning CBK (a GoK agent) will pay GoK for these t-bonds! This is akin to printing money - backdoor overdraft to GoK!
CBK would then have to go out & mop up all that liquidity from the market later. Fiscal patient spreading its disease to its monetary brother. Selling t-bonds not once but twice! Would like to see how this instruction would be implemented
