With the government sitting on a huge cash pile due to slow development spending, it has not raised much internal loans this fiscal year compared to previous years. As of now, the government has raised Rs 10 billion in internal loans, which is much below the target of Rs 44 billion.

With only two weeks left for the fiscal year to end, government officials say chances are slim the government would raise further internal loans. “With the government’s treasury full with cash, there is no need for internal borrowing,” said finance ministry officials.

According to the Finance Ministry, the government has cash reserves of Rs 70 billion. “Although budget disbursement has increased of late, we’ve not made any preparation for internal loans seeing no necessity,” said a ministry official.

The ceiling for internal borrowing increases every year with the expansion of country’s gross domestic product (GDP). However, the decline in internal loans despite growing GDP shows problems in budget implementation.

For the government, internal loan is the third source of resources for the budget after revenue and foreign aid. The government raises domestic debt to fill the deficit after collecting resources from revenue and foreign aid.

Nepal Rastra Bank uses instruments such as treasury bills, reverse repo, development bond, and foreign employment bonds to raise internal loans.

In the last fiscal year, the government had raised around Rs 19 billion in internal loans although the target was Rs 35 billion. The government had raised the highest Rs 36 billion in fiscal year 2011-12.