KHATMANDU: The Ministry of Finance (MoF) has raised debt worth Rs 88.53 billion from the domestic market to maintain the budget deficit of current fiscal year 2016-17.
The government had initially proposed to raise Rs 111 billion through domestic borrowing in the budget. However, the ceiling was revised to Rs 90 billion in May.
According to Laxman Aryal, chief of the Economic Policy Analysis Division at MoF, the government will not raise more money from the domestic market this fiscal year. “We have collected less than what we had estimated earlier and now we don’t have any plans to borrow more for this year,” he said.
The government revised the ceiling as the treasury surplus soared to Rs 270 billion. According to MoF, current treasury surplus stands at Rs 239 billion. Meanwhile, the government was unable to spend the allocated budget and thus reduced the initial ceiling of domestic debt.
“Though the government treasury is in a strong position, the banks and financial institutions (BFIs) do not have enough liquid funds,” Aryal said. “Therefore, we have decided not to borrow more money from the market,” he added.
The government issued development bonds, citizens savings bonds and foreign employment savings bonds twice in the current fiscal year, which were worth a total of Rs 63.3 billion and Rs 26.7 billion, respectively. However, BFIs and citizens purchased bonds worth only Rs 88.53 billion in total at an average interest rate of four or five per cent. The government had issued the aforementioned bonds and raised funds after February.
BFIs invest in government bonds to maintain their Statutory Liquidity Ratio (SLR). As per Nepal Rastra Bank, commercial banks must have 12 per cent SLR while development banks and financial institutions need to maintain nine per cent and eight per cent SLR, respectively. The government had raised Rs 88 billion through issuance of bonds in last fiscal 2015-16.
For the current fiscal year, the government had planned to generate Rs 565 billion through revenue collection, which is the main source of the budget. Likewise, it had estimated that it would receive Rs 106.9 billion through foreign grant and Rs 195.72 billion as foreign loan.