New agency to manage national debt

KATHMANDU, MAR 21 -

The Financial Comptroller General’s Office (FCGO) has stepped up efforts to establish a debt management office which will manage the country’s internal and external loans.

There are currently three agencies involved in managing national debt—the FCGO, the Ministry of Finance and Nepal Rastra Bank (NRB)—and a separate office has been envisaged to streamline the country’s debt related activities.

The FCGO, which is responsible for receiving and repaying such debts and keeping records, has started preparations to conduct a study on the nature of a debt management office (DMO), staffing pattern and its tasks and relations with other government and international agencies, among others.

“We have almost finalised the terms of reference to hire a consultant, and we plan to do so within the next three weeks,” said Mahesh Dahal, joint financial comptroller general at the FCGO. “The consultant will have to complete a study and submit a report within the current fiscal year.”

Dahal added that the report was expected to give a clear picture of the DMO, and the government would decide whether to establish one or not.

Making a study of the nature of the DMO has been included in the FCGO’s financial administration reform programme for which the Public Expenditure and Financial Accountability (PEFA) office has pledged financial support. The office has received the World Bank’s support, and it has allocated Rs 300,000 for the study.

“We will carry out the study using a local consultant,” said Dahal who heads the PEFA office at the FCGO. The FCGO will send the ToR to the World Bank for its okay before awarding the consultancy contract.

Earlier, a report prepared by consultant Tul Raj Basyal had suggested establishing a separate DMO under the Finance Ministry which would manage both external and internal debts.

“I suggested forming a separate body like the Central Bureau of Statistics which will study the country’s debt situation, issue the necessary debt instruments and advise the government whether to take foreign loans,” said Basyal who is a former executive director of NRB.

His report has suggested forming the DMO under a separate law having necessary provisions for management of both external and internal loans. Currently, NRB issues various debt instruments on behalf of the government to raise internal loans while the Ministry of Finance signs loan agreements with donors.

“A separate body to look after debt management is necessary as there is no agency to study and predict the consequences of the debts the country is accumulating,” said Basyal.

Having a separate body to deal with the country’s debts will free the central bank to focus on its core tasks of monetary operation and inflation control.

He added that the separate body may also advise the government on the risks and opportunities of receiving loans from private international capital markets when the country needs more capital for development purposes.

Source: Kantipur