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Internal loans ‘upped’ last FY
KATHMANDU, JUL 24 -
The government managed to raise almost all internal loans targeted for the last fiscal year 2009-10 although it had collected less than the targeted figures the previous year. Internal loan is one of the main sources of funds for the government in addition to revenue and external aid.
Amid complaints about the slow development expenditure, the government collected Rs. 29.91 billion in internal loans against the target of Rs. 30 billion last year. The government had collected Rs. 18.41 billion against the target of Rs. 25 billion the previous year-2008-09.
As long as the government has enough resources, it does not raise internal debt because it has to pay an interest for it. Bodh Raj Niraula, joint secretary at the Ministry of Finance, said the government had to raise the entire domestic debt as the relatively better expenditure last year demanded the additional resources. The government estimated to spend more than Rs. 85 billion in capital expenditure against the budget allocation of Rs. 106 billion last fiscal year.
This shows a huge gap in development expenditure against the budget allocation. However, Niraula said the government had to take all internal loans as the development budget allocated from foreign aid could not be spent. Nepal Rastra Bank (NRB) uses four types of instruments on behalf of the government to raise domestic debt— namely treasury bills, citizens saving bonds, development bonds and Special Saving Certificate.
The central bank raised Rs. 19.92 billion from treasury bills, Rs. 939.25 million from citizen saving bonds, Rs. 9.04 billion from development bonds and Rs. 4 million from foreign employment bonds last fiscal year, according to NRB.
The government generally raises debt in the last months of the fiscal year. Government securities worth Rs. 17.24 billion were issued during the last month of the last fiscal out of the total of 29.91 billion raised over the year. Government securities worth Rs. 12.66 billion had been issued in the first 11 months of the last fiscal. Similar was the case in the previous fiscal too. Securities worth Rs. 9.71 billion had been issued in the final month of the previous year against Rs. 18.41 billion total loans taken that year. “It is natural to see domestic loans raised in the latter months as they are taken on the basis of calculating the situation of the government’s treasury,” said Niraula.
NRB spokesperson Gopal Kafle said the central bank has to issue projected securities; until the government asks the NRB to halt the process. “The government also issues the bonds to check inflation, besides raising funds for development projects,” he added.
Among the government’s debt instruments, the citizens saving bonds are issued to mop up excess liquidity at the hands of the general public to bring down inflation.
The Treasury bills are also used for liquidity management in the banking system. The development bonds are instruments designed to assist the government’s need for development financing.
Special bonds are issued to address special objectives of the government, while foreign employment bonds aim to curb remittance generated for the investment in the productive sector.
Types of government securities
Fy 2008/09 FY 2009/10
Treasury Bills Rs. 9.00b Rs.19.92b
Citizens’ Saving Bond Rs. 1.66b Rs.939.25m
Development Bond Rs. 7.75b Rs. 9.04b
Foreign Employment Bond Nil Rs. 4m
Grand Total Rs. 18.41b Rs. 29.91b
Posted on: 2010-07-25 08:38
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