KATHMANDU, JULY 10, 2012
International Finance Corporation (IFC), the private sector lending arm of the World Bank Group, and Asian Development Bank have proposed to issue Nepali rupee bonds to raise funds and finance major infrastructure projects here.
Nepal Rastra Bank (NRB) Governor Yubaraj Khatiwada said the two lenders have proposed issuing Rs 20-billion Nepali rupee bonds—Rs 10 billion each.
Given the country in urgent need for resources to fund long-term infrastructure projects, Khat-iwada said the issuance of bonds would help generate the required funds. Funds raised from the bond issuance will be used in Nepal only, according to Nepali officials.
Nepali banks have long been resisting the temptation of investing in long-term infrastructure projects as the maturity period of their funds does not match with the time infrastructure projects take for generating revenues to repay loans.
Khatiwada said the central bank has ‘cleared the way’ for the bond issuance. He, however, said the Finance Ministry should settle the issue of taxation and issue manager of the bonds.
Both ADB and IFC have also talked to the ministry about the matter, submitting separate proposals. Although ADB made such a proposal a year ago, IFC made its proposal last week, according to the ministry. “We are holding discussions and they have so far been positive,” said Baikuntha Aryal, joint secretary at the ministry, adding he was yet to go through the details of the proposals.
In its proposal, ADB has asked the government to allow it to exchange the proceeds of the Nepali currency bonds for the currency of any another member of ADB without restriction and buy and sell the bonds in Nepal.
ADB has also sought exemption of taxes, including value added tax, transaction tax and stamp duties, among others.
Other conditions put forth by ADB are a confirmation that the tax exemption would apply to any amount payable by ADB or paid to ADB from transactions that may be undertaken in connection with the Nepali currency bonds; such bonds would not be subject to withholding, specifically allowing ADB and its agents to make interest payment to bondholders on gross basis without deduction for any withholding tax; ADB would not be required to disclose its financial transactions to any regulatory authority; and ADB would not require registering the bonds under any security laws and regulation of Nepal.
IFC has also talked with Nepali banks on the scope and the market for Nepali rupee bonds. NIC Bank chief executive Sashin Joshi said the international lender had consulted with them on interest rate and whether such bonds would be accepted here.
He said the move taken by IFC and ADB is positive for the banking industry as local banks could invest their surplus funds in the bonds.
Source: The Kathmandu Post
International Finance Corporation (IFC), the private sector lending arm of the World Bank Group, and Asian Development Bank have proposed to issue Nepali rupee bonds to raise funds and finance major infrastructure projects here.
Nepal Rastra Bank (NRB) Governor Yubaraj Khatiwada said the two lenders have proposed issuing Rs 20-billion Nepali rupee bonds—Rs 10 billion each.
Given the country in urgent need for resources to fund long-term infrastructure projects, Khat-iwada said the issuance of bonds would help generate the required funds. Funds raised from the bond issuance will be used in Nepal only, according to Nepali officials.
Nepali banks have long been resisting the temptation of investing in long-term infrastructure projects as the maturity period of their funds does not match with the time infrastructure projects take for generating revenues to repay loans.
Khatiwada said the central bank has ‘cleared the way’ for the bond issuance. He, however, said the Finance Ministry should settle the issue of taxation and issue manager of the bonds.
Both ADB and IFC have also talked to the ministry about the matter, submitting separate proposals. Although ADB made such a proposal a year ago, IFC made its proposal last week, according to the ministry. “We are holding discussions and they have so far been positive,” said Baikuntha Aryal, joint secretary at the ministry, adding he was yet to go through the details of the proposals.
In its proposal, ADB has asked the government to allow it to exchange the proceeds of the Nepali currency bonds for the currency of any another member of ADB without restriction and buy and sell the bonds in Nepal.
ADB has also sought exemption of taxes, including value added tax, transaction tax and stamp duties, among others.
Other conditions put forth by ADB are a confirmation that the tax exemption would apply to any amount payable by ADB or paid to ADB from transactions that may be undertaken in connection with the Nepali currency bonds; such bonds would not be subject to withholding, specifically allowing ADB and its agents to make interest payment to bondholders on gross basis without deduction for any withholding tax; ADB would not be required to disclose its financial transactions to any regulatory authority; and ADB would not require registering the bonds under any security laws and regulation of Nepal.
IFC has also talked with Nepali banks on the scope and the market for Nepali rupee bonds. NIC Bank chief executive Sashin Joshi said the international lender had consulted with them on interest rate and whether such bonds would be accepted here.
He said the move taken by IFC and ADB is positive for the banking industry as local banks could invest their surplus funds in the bonds.
Source: The Kathmandu Post
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