NRB raising more domestic debt to finance

According to NRB, it recently released Rs 65 billion out of Rs 90 billion in the government account for relief distribution and reconstruction activities.NRB is opening subscription of 'Citizens Saving Bonds 2077 Ka' and 'Foreign Employment Bonds 2077 Ka' with a maturity period of five-year and an interest rate offer of 8 percent and 9 percent, respectively. The central bank plans to raise a total of Rs 3.25 billion from these two instruments. Similarly, the central bank is also issuing two 'Development Bonds' with a maturity period of eight years and 11 years to raise Rs 25 billion this month. The government plans to raise a total of Rs 88 billion through domestic borrowing to finance its expenditures. However, subdued capital spending has led to a below-targeted internal borrowing in the previous fiscal years. The expectation that the government will increase its capital spending in the remaining half of the current fiscal year has given an impetus to the central bank to raise borrowing. "The central bank recently released Rs 65 billion from the government treasury for reconstruction activities. Similarly, work of development projects as well as reconstruction activities are being expedited which requires more funds. We are raising the debt following a cautious calculation," Min Bahadur Shrestha, an executive director of NRB, told Republica. The central bank intends to raise Rs 31.25 billion of internal debt, or 35.51 percent of the total borrowing, by mid-April through various instruments including the Treasury Bills. Public finance management experts, however, say that increasing borrowing against the backdrop of low capital expenditure only increases government's liabilities as it has to repay interest to creditors. According to experts, the government has failed to cash in on excess liquidity in the banking system and falling interest rates due to its low absorption capacity.