Abundant liquidity and low-interest rates spur early debt collection

KATHMANDU: The government has commenced its internal debt-raising efforts in line with the annual target for the current fiscal year. Starting from July, domestic debt collection is underway.

Simultaneously, Nepal Rastra Bank has invited information for the sale of development bonds valued at 10 billion rupees. The notification by the bank specifies that discussions regarding the loan can take place until 3 pm on Thursday, July 18. The maturity period for the bond, known as ‘Development Bond 086 ‘Ch,’ is set at 6 years.

The interest rate for the bond will be determined through negotiations. The bonds are available for purchase by banks, financial institutions, non-bank financial institutions, insurance companies, organized organizations, and Nepali citizens.

These bonds can be used as collateral to obtain loans from banks, financial institutions, and the National Bank, with the interest paid semi-annually. The minimum investment in bonds is 50,000 rupees, while the maximum limit is set at 50,000 without exceeding the total issued amount.

The government aims to collect 1 trillion 10 billion rupees of internal debt by December. Nepal Rastra Bank has released the table outlining the domestic debt collection set by the government in the budget statement for the current fiscal year.

The plan is to collect 1 trillion 10 billion rupees by January and an additional 1 trillion 30 billion rupees over the following 6 months, resulting in a total of 2 trillion 40 billion rupees for the year.

To meet its target, the government is utilizing various instruments, such as treasury bills, development bonds, citizen savings bonds, and foreign employment savings bonds. In the previous fiscal year, the government successfully achieved 99.99 percent of its target to raise 2 trillion 56 billion rupees in domestic debt.

Unlike the previous year, the government has decided to begin domestic debt collection right from the first quarter of this fiscal year. This decision is influenced by the abundant liquidity in the financial system and the prevailing low-interest rates.

For the current fiscal year, the National Bank intends to issue 55 billion rupees worth of treasury bills, 1 trillion 79 billion rupees worth of development bonds, 5 billion rupees worth of citizen savings bonds, and 1 billion rupees worth of foreign employment savings bonds.

The allocation in percentages for these instruments is 22.9 percent for treasury bills, 74.6 percent for development bonds, 2.1 percent for citizen savings bonds, and 0.4 percent for foreign employment savings bonds, as indicated in the provided table.