KATHMANDU: The Government of Nepal plans to raise NPR 18.5 billion through treasury bills on Monday, aiming to manage its internal debt obligations. The Public Debt Management Office (PDMO) announced this in a recent notice, specifying that the funds would primarily be used to renew previously matured treasury bills of an equivalent amount. The bidding for these treasury bills will remain open until 3 PM on Monday (December 9, 2024), with the issuance scheduled for Tuesday.
This initiative aligns with the government’s ongoing efforts to address budgetary gaps and manage financial obligations through internal borrowing. Treasury bills, a low-risk debt instrument, have become a cornerstone of the government’s fiscal strategy, alongside other tools such as development bonds, citizen savings certificates, and foreign bonds.
In the most recent treasury bill auction, the weighted average interest rate was recorded at 2.99%. Banks and financial institutions placed bids at interest rates ranging from 2.31% to a maximum of 3%, reflecting market confidence in these instruments.
The government’s budget for the current fiscal year stands at NPR 1.8603 trillion. Of this, NPR 1.14066 trillion, or 61.31%, is allocated for recurrent expenditures, while NPR 352.35 billion (18.94%) is earmarked for capital spending. The remaining NPR 367.28 billion, accounting for 19.74%, is designated for financial management. Compared to last year, the budget has increased by 6.2%, with a 21.56% rise from the revised estimates.
Despite these allocations, Nepal faces a substantial budget deficit. Revenue generation is expected to contribute NPR 1.2603 trillion, and foreign grants are projected to bring in NPR 52.33 billion. This leaves a gap of NPR 547.67 billion to be addressed through borrowing. To manage this shortfall, the government plans to secure NPR 217.67 billion in foreign loans and NPR 330 billion through internal borrowing. Treasury bills are a crucial component of this borrowing plan, bridging the gap between revenue collection and expenditure requirements.
While internal borrowing has been a reliable method for managing fiscal pressures, it also raises concerns about increasing debt servicing obligations. Financial experts caution that the government’s rising reliance on treasury bills and other debt instruments could pose long-term challenges. Efficient revenue collection, prudent expenditure management, and sustainable debt practices are seen as critical to maintaining fiscal stability.
The issuance of NPR 18.5 billion in treasury bills demonstrates the government’s immediate efforts to manage its financial commitments. As the fiscal year progresses, its ability to balance internal and external borrowing while addressing structural challenges in the economy will play a decisive role in maintaining economic stability.