In the week of Nov.13, 2017, the Ministry of Finance announced plans to issue $1.7B in Eurobonds, in exchange for an equivalent amount of T-bills from the Central Bank (BDL). The operation would shrink the central bank’s portfolio of T-Bills that stood at $7.2B by June 2017 , to $5.5B; however, the operation is not regarded as another financial engineering attempt as the one conducted in June 2016.
Back to June 2016, BDL had conducted a swap operation by which commercial banks bought Eurobonds from the central bank and deposited dollars; in exchange, BDL purchased the banks’ holding of T-Bills at a premium, comprising part of the remaining coupons on these bills. In order to boost their participation in the Swap operation, commercial banks attempted to attract fresh money into the country. To do so, banks sold a portion of their Eurobonds portfolio to foreign institutions, borrowed some money from their correspondent banks, and mounted products related to the Swap targeting their largest non-resident depositors or other depositors able to bring money from abroad, while offering them attractive yields. Commercial banks then placed the collected dollars at the central bank. The end result increased BDL’s Foreign Assets from $36.2B by June 2016 to $43.4B by October 2017.