NRB to issue citizen saving bond today
KATHMANDU, APR 23:
The last minute rush in government expenses has speeded up internal debt issuance as the fiscal year approaches its last quarter.
The government’s debt manager –– Nepal Rastra Bank (NRB) –– announced the issue of Citizen Saving Bond 2074 worth Rs 1.41
billion from Monday. The bond, which will mature in five years in April 2017, is being sold at 9.5 per cent coupon rate.
Though the bond calendar issued by the central bank had anticipated to raise Rs 19.9 billion as of mid-March it only raised Rs seven billion worth of internal debt through the issuance of treasury bills and development bonds. In late March, it issued a batch of development bonds worth Rs 6.5 billion.
“Nepal Rastra Bank issues bonds only if the government requires the funds, and around the end of the fiscal year most of the government projects will be on full swing requiring more money,” pointed out the central bank’s spokesperson Bhaskar Mani Gyanwali.
Capital expenditure has remained disappointing this fiscal year too as only 32 per cent of the allocated budget has been spent till the third quarter. The budget for the fiscal year has allocated Rs 72 billion under the heading of capital expenditure.
According to the latest reports of the Finance Ministry, 57 per cent of the total recurrent expenditure has been spent by mid-April.
The government has estimated to raise Rs 37.41 billion through internal borrowing this fiscal year to meet its budget deficit.
According to the central bank’s public debt calendar, NRB is expected to sell treasury bills worth Rs 16 billion, development bonds worth Rs 16 billion, national savings bond worth Rs 5 billion,
citizen saving bonds worth Rs 1.4 billion and foreign employment bond worth Rs one billion, over the period of a year.
The last quarter will see debt instruments worth Rs 24 billion with foreign employment bonds worth Rs one billion meant for retail investors. The response of the individual investor to government bonds is not at all exciting as less than 10 per cent of the total issue was taken by migrant workers.
Lately, due to the absence of viable projects and the swelling liquidity in the banking system, financial institutions have taken public debt instruments as a lucrative investment tool despite its relatively low yield.
“It is better if the banks look out for projects to finance instead of investing their deposits in idle tools such as bonds,” said Nepal Rastra Bank spokesperson Gyanwali.
With growing liquidity, short-term interest rate in the financial system has gone below one per cent but long-term interest rate remains stationary, thus the financial institutions are investing in government bonds which yield more than five per cent at premium rate.
Source: THT
