Govt to raise internal loans after 10-month gap

Govt to raise internal loans after 10-month gap

With the government requiring huge resources for the relief, rehabilitation and reconstruction purposes after the earthquakes, it has started homework to raise internal loans after a gap of 10 months.

The Finance Ministry last week wrote to the Nepal Rastra Bank (NRB) asking it to raise all the loans planned for this fiscal year.

The government, in the budget for this fiscal year, has announced raising internal loans of Rs 52.75 billion. But the government had been delaying raising the debt as it already had over Rs 90 billion in its coffers. It raised internal loans of just Rs 20 billion last fiscal year against the target of Rs 44 billion.

A senior NRB official said they have prepared the issue and auction calendars after the government’s request. “We have sent the document with specific timeline for raising the debt and types of instruments to be used for the government’s approval,” said the official.

The central bank has been authorised to raise internal loans through various instrument such as development bonds, citizen saving bonds, treasury bills, and foreign employment bonds, among others. According to the NRB, the government will raise around two-thirds of the debt by issuing development bonds, while rest of amount will be raised through citizen saving bonds, foreign employment bonds and treasury bills.

The government also plans to raise a substantial amount next year if the country needs. “We will significantly increase the size of the internal loans in the next fiscal year as we have to generate as much as resources,” said Finance Secretary Suman Sharma. “As our debt against the gross domestic product is relatively lower, we have some space to increase domestic borrowing.”

As of the last fiscal year, the government’s debt-to-GDP ratio stands at 30.1 percent, while outstanding external debt-to-GDP ratio is 18.4 percent. Nepal’s debt against GDP in fiscal year 2002-3 was 62.6 percent, according to the Finance Ministry.

The government expects the external debt could also rise if the donors commit assistance in the form of loans.

A representative of a donor agency said it had not yet confirmed whether the assistance would be extended in loan or grant.

Multilateral donors such as World Bank and Asian Development Banks have discontinued providing grant for the last two years, citing Nepal’s improved debt servicing capacity and lower debt-to-GDP ratio.

The government has announced a reconstruction fund of Rs 200 billion, putting in Rs 20 billion from its part. It wants to raise the remaining amount from the donors after holding international conference of donors shortly.

Source: eKantipur