Two consecutive years' failure could not deter government

The central bank is gearing up to permit the purchase of foreign employment bonds in Nepal from remittance money to push the sales of Foreign Employment Bond.

The last two releases of Foreign Employment Bond were not successful as the bond agents in foreign countries were able to sell only meagre portion of the total issue.

“But this time, we will allow the bonds to be purchased by the migrant workers’ family members as well from the remittance,” spokesperson for Nepal Rastra Bank (NRB) informed Bhaskar Mani Gyanwali. NRB will make migrant workers to open bank accounts at home at zero balance and channel the remittance through the account, he said, adding that the deposits in that account can be used by the worker’s family to purchase the bond.

Earlier, the bonds were sold in five destination countries – South Korea, Malaysia, Qatar, Saudi Arabia and United Arab Emirates through the designated agents. As the higher interest rate at home also could not attract the Nepali migrant workers to purchase the bond abroad, the central bank is looking forward to luring the migrant worker’s family to purchase the bond.

Last fiscal year, the central bank had issued Foreign Employment Bond worth Rs 5 billion, of which only Rs 4 million worth of bonds were sold despite the attractive coupon rate of 10.5 per cent per annum. It had even extended the purchase period by ten days.

The fiscal year before that also the agents were able to sell only Rs 4.6 million worth of the first issue of Foreign Employment Bonds of the total issue worth Rs 1 billion. The central bank in 2009-10, has planned Rs 7 billion worth Foreign Employment Bond but issued only Rs 1 billion.

But NRB had revised the coupon rate for last fiscal year’s issue of the bond making it the highest interest yielding long term government debt instrument to attract more migrant workers. However, that also failed to catch the attention due to absence of enough publicity. “This fiscal year’s issue will see more publicity for the bond to create awareness among migrant workers,” Gyanwali said, attributing absence of publicity for cold response for the previous issues of the bond.

The government is expected to raise Rs 37.41 billion through internal borrowing this fiscal year to meet its budget deficit. Along with citizen saving bond, development bond and treasury bills, Foreign Employment Bond will be issued by the central bank.

The Foreign Employment Bond is supposed to be an instrument to channelise the remittance earned by the migrant workers and give them opportunity to divulge in risk free high return instrument. Moreover, it was considered to be an effective passage to divert the remittance coming in from informal channels to the formal.

The designated agents had also blamed lack of publicity for the failure of the bonds abroad. The low commission fee of 0.25 per cent that remitters get for mediating bond’s sales also did not encourage the agents to push for the sales.

Each year around 300,000 Nepalis are leaving for foreign countries in search for jobs. Currently, there are more than 2 million migrant Nepali workers, who are working in different destinations across the globe. The estimated annual earning of them is considered to be over Rs 400 billion.

According to a recent study of World Bank, Nepal is one of the top ten remittance receiving countries with $2.5 billion in 2009-10.

Published on: 22 August 2011 | The Himalayan Times