Govt set to issue securities on quarterly basis
KATHMANDU:
Breaking away from the trend of last minute hasty issuance of government securities, the government and its debt manager — Nepal Rastra Bank (NRB) — will from now on launch securities in the market on a quarterly basis.
“This time, NRB and the Finance Ministry have started working on issuing government securities on a quarterly basis instead of waiting till the need arises,” informed an official at NRB’s Public Debt Management Department.
“We have already prepared a calendar for the current year and forwarded it to the Finance Ministry for approval,” added the official.
Moreover, this time they are confident that the schedule will be followed due to the timely budget because that requires cash flow for the government.
This fiscal year, domestic borrowing worth Rs 44 billion is expected to be raised to finance budget deficit that will not be covered by revenue and foreign aid.
In the past too, NRB used to publish a periodic debt calendar but the schedule was hardly followed. Mostly, the last quarter of the fiscal years are bombarded with government debt issuance and buyers have a difficult time managing funds.
In the last fiscal year, NRB launched treasury bills worth Rs 19 billion with less than 20 days remaining for the fiscal year to end.
Likewise, in fiscal year 2011-12, NRB had anticipated to raise Rs 19.9 billion as of mid-March and it only raised Rs seven billion worth of internal debt through issuance of treasury bills and development bonds while the rest of the debt instruments were put up for sale in the fourth quarter.
“We issue bonds whenever the government and its fiscal authority — Finance Ministry — asks us to raise funds for government expenditure, so the time of issue is heavily dependent on government expenditure,” according to the NRB official.
However, last minute issuance of government bonds and treasury bills creates difficulty for financial institutions that are the major buyers of these securities. “We have a hard time allocating funds when most of the bonds and treasury bills are released towards the end of the year, as most of the liquidity gets utilised at the end of the year,” said vice president of Nepal Bankers’ Association Upendra Poudyal.
“It would be better if the debt calendar is followed so that financial institutions can plan and manage the portfolio accordingly,” added Poudyal, who is also CEO of NMB Bank.
Government securities are not only investment instruments for financial institutions but are indispensable in investment portfolios to maintain required Statutory Liquidity Ratio. Likewise, NRB uses these instruments in balancing liquidity in the financial system.
Moreover, the failure of foreign employment bonds meant for Non-Resident Nepalis (NRNs) and migrant Nepalis is attributed to
the hasty issue at the end of the year. Since foreign employment bonds are issued almost at the end of fiscal years, the subscription rates remain discouragingly low as the agents do not have enough time to create a buzz for it.
In the last fiscal year, bonds worth Rs one billion were issued of which bonds worth only Rs 42.8 million were sold. In fiscal year 2011-12, of the total offering worth Rs one billion, agents were able to sell a mere Rs 8.6 million worth of bonds.
Source: THT
