8:57 AM, 9th April 2020, About A year ago 2
HM Treasury and the Bank of England have agreed to extend temporarily the use of the government’s long-established Ways and Means (W&M) facility. The W&M facility functions as the government’s overdraft account with the Bank of England, i.e. the facility which enables sterling cash advances from the Bank to the government.
The previous high for use of the W&M account was £19.9bn in 2008. Ordinarily a standing balance of around £0.4bn is maintained to support Exchequer cash management As of 8 April 2020, drawings under the W&M facility remain at £0.4bn, but the outstanding balance will be published weekly on the Bank’s website as and when government decide to draw on the facility
As a temporary measure, this will provide a short-term source of additional liquidity to the government if needed to smooth its cashflows and support the orderly functioning of markets, through the period of disruption from Covid-19.
The government will continue to use the markets as its primary source of financing, and its response to Covid-19 will be fully funded by additional borrowing through normal debt management operations. Any use of the W&M facility will be temporary and short-term.
As well as temporarily smoothing government cash flows, the W&M facility supports market function by minimising the immediate impact of raising additional funding in gilt and sterling money markets.
The W&M facility is the government’s pre-existing overdraft at the Bank. Any drawings will be repaid as soon as possible before the end of the year. HM Treasury, the Debt Management Office and the Bank will continue to cooperate closely to support the orderly functioning of the gilt and sterling money markets.
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