KATHMANDU, OCT 09, 2013
The Ministry of Finance has opened the gates for international financial institutions to issue local currency bonds so as to raise funds from the domestic market to finance various development projects.
A decision in this regard was taken by finance minister Shanker Koirala on Monday, with the approval of a 10-point guideline on issuance of such bonds.
“We will now start accepting applications from international financial institutions for issuance of local currency bonds in the country,” the finance ministry spokesperson Ram Saran Pudasaini told The Himalayan Times. “But such permission will be granted only to those institutions that have received high credit rating from global credit rating agencies.”
As per the Finance Ministry, those interested can file applications mentioning the objective behind the issuance of bonds, potential investment sectors, major investors, quantity of bonds to be issued, their maturity date, coupon rates, interest spread and schedule for issuance of bonds. Other disclosures should be made as per the Securities Act.
“The Finance Ministry will look into those applications and then forward them to the Cabinet for final approval if they meet the criteria set by the government,” Pudasaini said. “This means we will take decisions on whether to allow international institutions to float bonds here on case-by-case basis.”
The latest decision is expected to benefit institutions like the Asian Development Bank and International Finance Corporation — the private sector arm of the World Bank — as they have long been demanding that the government introduce such a policy.
The provision, it is believed, would provide them flexibility to raise some funds here instead of bringing all from abroad.
The money thus raised will have to be channeled to development of sectors such as hydropower, agriculture, roads, tourism and infrastructure, said the Finance Ministry in a statement issued today.
The ministry hopes the latest measure will facilitate collection of large sums of money required for the construction or implementation of huge projects.
“It is believed the tool will also reduce exposure of investors towards certain risks and help channel funds towards priority sectors,” the Finance Ministry mentioned.
“Also, issuance of bonds will allow the government to mobilise additional funds from domestic sources, reduce country’s reliance on foreign loans, open new investment avenues for institutional investors, prop up the country’s capital market and provide another tool for liquidity management.”
Source: THT
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