Govt repays more internal loans than allocated sum

- PRITHVI MAN SHRESTHA, Kathmandu
Govt repays more internal loans than allocated sum

Jul 4, 2015-

The government this year repaid more internal loans than the budgetary allocation, which it said was a result of savings in the budget allocated to pay interests.

The government has so far paid Rs42.55 billion, while the budget allocation for principal payment was Rs32.54 billion, according to the Nepal Rastra Bank (NRB) that which works as an intermediate to repay the loans.

The Financial Comptroller General Office (FCGO), which tracks the government’s income and expenditure, said the government is repaying another Rs4.99 billion to domestic creditors, whose file has already moved from the FCGO to the Finance Ministry. It means, the government will be paying Rs47.55 billion in total this year.

“We have been paying additional principal than the budgeted amount because we could have more amount from the amount allocated for interest payment,” said Ramesh Siwakoti, deputy financial comptroller general.

“Due to low interest rate in treasury bills (T-bills), we could save the budget from the allocated amount for interest payment.”

Due to excess liquidity in banks and financial institutions (BFIs), which hold the highest portion of the T-bills, the discount rate (interest rate) of T-bills has come down to as low as 0.16 percent.

Although the government has been repaying internal and external loans without delay as it has been saving budget for its failure to spend budget for the last several years, Siwakoti said the savings from the unspent budget in the development projects have not been used in repaying internal loans.

The government has allocated a separate budget of Rs18.5 billion for interest payment, but as of the third quarter, it spent just Rs4.18 billion, saving around Rs12 billion, according to the FCGO.

The government pays principal and interest through separate windows for the domestic debt.

Although interest rate on T-bills has remained low for the last three years due to excess liquidity with banks, Siwakoti said a relatively higher budget allocation for interest payment could also be the reason why the huge amount was saved from that heading. Even now, banks have excess liquidity of around Rs100 billion.

Also, the government raised less internal debt this year compared to its repayment, which brought down the overall size of the domestic debt. The government has so far raised Rs42.34 billion, which is Rs210 million less than the repayment.

Had the earthquake not struck the country on April 25 that caused a huge damage, the government was unlikely to raise domestic debt to the extent it has raised so far, according to government officials. Finance Ministry officials said the government raised the loans this year so that it could be saved to put in the National Reconstruction Fund instead of spending this fiscal.

For the last three years, the total size of internal debt has been coming down, with the government not raising the loans amid its failure to spend.

At the end of 2011-12, the domestic debt was Rs209 billion, which came down to Rs207 billion in 2012-13, and further decreased to Rs201.81 billion in 2013-14. It is expected to remain at Rs201.6 billion at the end of this fiscal year if the government does not raise further debt.

Published: 05-07-2015 08:04

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