Central bank to issue foreign employment bond early

KATHMANDU:

After having learnt lessons from past failures, government’s debt manager — central bank — will be issuing a batch of foreign employment bonds early on this fiscal year to record better subscription rate instead of scrambling at last minute.

Nepal Rastra Bank (NRB) has announced the issue of Foreign Employment Bond 2075-KA worth Rs 250 million, which will be on sale from mid-December. Along with issuing the bonds in mid-fiscal year, NRB has also decided to sell the bonds in a phase-wise manner instead of putting the whole bunch for sale in one go like it used to do previously.

The current batch of five-year foreign employment bonds targeted at Nepali migrant workers and Non Resident Nepalis (NRN) is being offered at nine per cent coupon rate. The issue will be open from December 16, 2013, to January 6, 2014.

The bond that is supposed to be a fine instrument to channel the income of migrant workers into productive investment, has a hard time getting subscribed.

“Previously, we used to issue the bond towards the end of the fiscal year so we were unable to undertake promotional campaigns properly,” pointed out deputy director of NRB’s Public Debt Management Department — that looks after the government’s internal debt management — Dr Gopal Bhatta.

“We are hopeful that this year since we have released the bonds early and in a phase-wise manner, the subscription rate will be better,” he said, adding NRB will release other batches of the bond later in the year.

The designated agents of Foreign Employment Bond 2074 — issued last fiscal year — had been able to sell bond units worth Rs 42.8 million of the total issue of Rs one billion. In fiscal year 2011-12, NRB had offered bonds worth Rs one billion but migrant Nepalis including NRNs applied for bonds worth Rs 8.6 million only.

Likewise, the previous two issues barely got subscribed by five per cent of the total issue despite the attractive returns of over 9.5 per cent — that were higher than the prevalent fixed deposit rate at Nepali banks.

The first foreign employment bond, issued in fiscal year 2009-10, had seen subscription worth Rs 4.6 million of the total issue of Rs one billion at 9.5 per cent interest. Likewise, in fiscal year 2010-11 too, bonds worth only Rs four million of the total issue worth Rs five billion were sold.

NRB has designated seven agents — four remitters and three financial institutions — targeting NRNs and migrant workers.

Source: THT