The government is set to raise Rs 10bn in domestic debt through a development bond auction. The Public Debt Management Office (PDMO) issued a notice regarding the six-year ‘Development Bond-2087’ on Wednesday. This will raise the amount that the government has raised in the form of domestic debt in the month of Magh (mid-January to mid-February) to Rs 50bn. The government earlier raised Rs 10bn through treasury bills and Rs 30bn through development bonds.

Banks and financial institutions, non-banking financial institutions, insurance companies, organized groups, and the general public participated in the auction between 10 am and 3 pm on Wednesday. The bonds will be issued on Thursday. According to the PDMO, competitive and non-competitive bidders have been allocated 85 percent and 15 percent of the total amount, respectively, i.e., Rs 8.5bn and Rs 1.5bn. If the full amount is not received from non-competitive bidders, the remaining amount will be sold to competitive bidders. The interest rate will be determined through the auction process.

Interest payments on the bond will be made every six months, while the principal amount will be repaid on 7 Feb 2031. According to the PDMO, interested institutions and Nepali citizens can buy bonds for a minimum of Rs 500,000 and up to the total issued amount in multiples of Rs 500,000. The certificate of this loan or bond can be used as collateral to obtain loans and can be traded in the secondary market.

Taking advantage of the high liquidity and lower interest rates in the financial system, the government has expedited the process of raising domestic debt by revising its schedule. The PDMO has revised the quarterly domestic debt schedule for the current fiscal year. The government plans to raise Rs 113bn in the third quarter (mid-January to mid-April) of the current fiscal year. As per the revised schedule, only Rs 35bn will be raised in the fourth quarter.

According to the PDMO, the government raised Rs 115bn in the first quarter and Rs 66.5bn in domestic debt in the second quarter of the current fiscal year. It has set a target to raise Rs 330bn in domestic debt in the current fiscal year. Of this, it has already raised Rs 221.5bn.