All tasks related to auction and issuance of domestic debts will now be managed by the Public Debt Management Office (PDMO). Publishing a notice on Sunday, the Nepal Rastra Bank (NRB) announced that the auction and issuance of treasury bills and government bonds will be conducted exclusively through the PDMO starting from April 1.

The Monetary Management Department of the NRB had previously been responsible for all tasks related to domestic debt. Although there were concerns about the same entity handling fiscal and monetary policies, the central bank had been managing public debt in the absence of a separate entity and necessary laws.

The government established the PMDO five years ago specifically for the purpose of managing public debt. While the PMDO was already handling external debt, it will now be responsible for all operations related to domestic debt starting from Monday. “Since the PDMO will make auction decisions based on DOMS, the central bank requests participants to submit bids through both DOMS and OBSS,” the NRB said in the notice.

The Public Debt Management Regulations, 2024, paved the way for the PDMO to handle all domestic debt operations. The regulations were published in the gazette on March 14. According to the regulations, the PDMO should manage public debt by maintaining consistency between fiscal and monetary policies. Similarly, it will be responsible for granting licenses to market makers and sales agents, as well as monitoring their transactions. The PDMO will be required to publish the annual schedule for mobilizing domestic debt, auction schedule, and any revised schedules by informing the Nepal Rastra Bank (NRB).

As per the regulations, the Revenue Secretary will chair the Debt Instrument Issuance and Operation Committee that will prepare the schedules. Joint secretaries of the Economic Policy Analysis Division of the Ministry of Finance and Economic Management Division of the National Planning Commission and the Deputy Auditor General of the Office of the Auditor General will be the members of the committee.

The regulations also state that the interest rate on government debt in the form of overdraft or bonds issued against it shall be equal to the weighted average interest rate of 91-day Treasury Bills for the fiscal year in which the overdraft was taken. With the responsibility of domestic debt management transferred to the PMDO, the Monetary Management Department of NRB will now focus solely on the effective management of monetary instruments, according to NRB officials.