IFC files application to float local currency bonds

KATHMANDU: 

The International Finance Corporation (IFC), a private sector lending arm of the World Bank, has proposed to issue around $500 million worth of local currency bonds in the country, becoming the first international financial institution to file an application for floatation of Nepali rupee bonds since the government introduced a guideline on it in October.

“Yes, the IFC has filed an application at the Ministry of Finance (MoF) to issue Nepali rupee bonds to raise local currency for relending and to deepen the capital market

of Nepal,” IFC resident representative Valentino S Bagatsing told The Himalayan Times through e-mail.

The MoF also confirmed receipt of the application. “But we are yet to take a decision in this regard as we are still discussing on it,” chief at MoF’s economic policy analysis division Navraj Bhandari said. “Once we finalise everything, we will send the proposal to the Cabinet for final approval.”

If permission is granted, IFC will be able to raise money required by private sector for investment in development projects from inside country rather than bringing it from abroad.

IFC, which has already floated such securities in over 30 countries globally, plans to issue bonds worth around $500 million (approximately Rs 50 billion) within the next five to 10 years ‘depending on the actual need to disburse funds for relending’.

The money raised from the sale of these bonds will be lent to the private sector for investment in projects ranging from infrastructure, banking and telecommunications to agri business and tourism, among others, according to Bagatsing.

However, the yield and maturity on these bonds are yet to be fixed. Said Bagatsing: “They will be determined during book building process to be undertaken by a group of local underwriters.”

IFC filed an application for issuance of bonds after the Finance Ministry, on October 8, issued a guideline on local currency bonds for international financial institutions with AAA credit rating from global credit rating agencies.

The MoF, in its guideline, had stated that those interested in floating such bonds can file applications mentioning the objective behind issuance of bonds, potential investment sectors, major investors, quantity of bonds to be issued, their maturity date, coupon rates and interest spread.

The ministry hopes this facility will facilitate collection of large sums of money required for construction or implementation of huge projects. This will also 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