Economy

Domestic debt goes beyond Rs 120 billion

Published by Octron on November 22, 2009

The country’s domestic debt stands at Rs. 120.85 billion as of mid-October this year, according to Nepal Rastra Bank (NRB). It is an increase of around Rs. 12 billion from same period last year when the country’s domestic debt stood at Rs. 108.32 billion.

Domestic debt is one of the instruments of the government to finance budget deficits. The government aims to raise Rs. 30.91 billion from internal debts this year. The government borrowed around Rs. 18 billion last year.The government has used various instruments to raise domestic debts — bonds and treasury bills.

The govenrment has issued such instruments as development bonds, citizen savings bonds, special bonds, national savings bonds and treasury bills. Various banks, individuals and institutions have purchased these government securities to finance the budget deficits.

Treasury bills are most popular among the instruments and their share in total debt stands at 71.59 percent, followed by development bonds (24.39 percent). The citizen savings bonds account for 3.69 percent while the national savings bonds and special bonds contribute 0.18 percent, each. Treasury bills have different maturity periods ranging from 28 to 364 days. NRB, which holds 23.59 percent of the government’s treasury bills, is the biggest financier through this instrument. But, other financiers are ahead in other securities. However, commercial banks are biggest contributors to internal loans. They have purchased 62.06 percent of government securities while the central bank has bought 18.33 percent. The public holds 2.56 percent.

The government will have to pay back the subscribers about Rs. 77.33 billion. But, the government does not pay back all the loans this year. It has allocated just Rs. 14.15 billion for internal debt servicing this year. “The government can delay paying against the treasury bills as there is provision for continuation in this instrument,” said Lila Prakash Sitaula, executive director at Public debt management department of NRB. “But, it can not deny paying for other instruments at the end of the maturity period.” Of the total liability, the treasury bills make up Rs. 73.82 million.

The government has scheduled to pay back the securities worth Rs. 13.20 billion in the next fiscal year 2010/11.

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