Internal debt authorities have decided to trimmed down the size of foreign employment bond following its weak performance in the last two years. This fiscal year only Rs one billion worth of foreign employment bonds will be issued, according to the bond calendar issued by Nepal Rastra Bank (NRB)’s Public Debt Management Department.

“The issuance of two previous years did not fair well with the migrant workers so NRB and finance ministry decided to issue less foreign employment bonds this year,” said Bhaskar Mani Gyanwali, spokesperson for NRB.

Last fiscal year, NRB 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. The central bank had even extended the purchase period by ten days also.

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.

To attract more purchasers, this time NRB can be expected to allow the bonds to be purchased by the migrant workers’ family members as well from the remittance income received here.

The fiscal year before that also the agents were able to sell Rs 4.6 million worth of the first issue of foreign employment bonds in Nepal of the total issue worth Rs 1 billion. The government had originally planned to issue foreign employment bonds worth Rs 7 billion.

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 bond worth Rs 1.4 billion and foreign employment bond worth Rs one billion, over the period of year.

“The authorities can be expected to fix interest rate aboutnine per cent for the bonds but it is subjected to different factors,” informed the central bank’s spokesperson.

Last fiscal year following the skyrocketing interest rate in the money market, the debt management authorities have revised the coupon rate as high as 10 per cent for a batch of national saving bond with five year maturity period. The banks and financial institutions are offering about 13 per cent of interest on one year fixed deposits which pushed the central bank to increase interest on bonds to make them more marketable.

Published on: 26 December 2011 | The Himalayan Times