The central bank officials are not sure whether the higher interest rate would be enough to attract subscriptions to foreign employment bonds. In fact, the interest rate offered for the subscription of foreign employment bonds has continued to remain on the higher side since its inception in 2010.
“It has not been clear why subscription has continued to remain disappointing for years,” said a senior NRB official. “In fact, no thorough study has been conducted to identify the real reason behind disinterest in subscribing to foreign employment bonds despite very good interest rates.” When foreign employment bonds were first issued on July 16, 2010, the interest rate was offered at 9.75 percent. And, never in the last 14 years, the offered interest rate has not been less than 9 percent. In the FY 2009/10, bonds worth Rs 1bn were issued but there had been a subscription of Rs 4m. In the next FY 2010/11, the government issued bonds worth Rs 5bn, of which Rs 3.38m worth units were subscribed, or 0.07 percent of the bonds issued. In the initial four years of its inception, bonds worth Rs 1bn were issued for three years and bonds worth Rs 5bn were issued in one year. Citing the poor response, the government started to decrease the size of the bonds in later years. The bonds worth Rs 250m to Rs 1bn were issued in the later years. In the last FY 2021/22, bonds worth Rs 500m were issued. But the subscription was worth Rs 56.7m only. The NRB official said that the lack of interest among migrant workers to buy bonds might be because it may not be on their priority list. “Most migrant workers prioritize running households, education and health of their children, buying a plot of land and building a modern house,” said the NRB official, adding, “Another factor might be the lack of financial literacy.” Foreign employment bonds cannot be purchased time and again. There is a certain window to buy such bonds. “They may not have money to buy the bonds when they are issued,” the official said. Even though remittances have been the main source of the foreign exchange reserves in the country for the last several years. Nepal’s remittance earnings increased 27 percent to Rs 689.88bn in the first seven months of the current FY 2022/23, as compared to the same period last year, according to NRB. The remittances have enabled the country to import goods by paying foreign exchange, and concerns are being expressed about its utilization in the non-productive sectors. The idea of introducing foreign employment bonds was conceptualized to utilize remittance for national development. “If we can create an environment where the migrant workers can subscribe to foreign employment bonds anytime in a year or extended period of time, there might be more subscription of bonds,” the NRB official said. “The government should itself be serious on the matter as it is its debt instrument.”
