IFC’s bond offer for Rs 50 b set to be approved

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    KATHMANDU, March 30

    International Finance CorporationThe government has started preparations taking the permission sought by the International Finance Corporation (IFC) under the World Bank (WB) to sell bonds worth around Rs 50 billion in five years positively.

    The cabinet meeting on Thursday has sent the IFC’s proposal to sell bonds in local currency to the Economic Infrastructure/Social Development Plan and Monitoring Committee. The committee under the Office of the Prime Minister and Council of Ministers is likely to accept the proposal on Monday as most of the proposals sent by the cabinet are. The finance minister chairs the committee. The IFC proposal had reached the cabinet through the Finance Ministry.

    The plan to sell bonds in local currency has been brought forward to reduce the risk of lack of funds for developers of projects and targeting long-term investors. The IFC proposal has been prioritized even though the Asian Development Bank (ADB) had also showed interest to sell bonds. Finance Secretary Shanta Raj Subedi said bonds can be issued in local currency in a way to allow spending on infrastructure, agriculture and tourism. He opined that bonds will be useful to reduce the losses arising from the higher exchange rate on foreign loans and to address the problem of excess liquidity in the local financial institutions.

    He stated that the ministry and the Securities Board of Nepal (SEBON) can put up necessary conditions for sale of bonds. The ministry has accordingly moved the process of allowing IFC to sell bonds with some conditions. The interest rate for bonds and the process of investment will be determined through mutual agreement after giving permission. The interest rate is set to be determined on the basis of the funds raised from selling the bonds and the projects where it will be invested.

    It is difficult to arrange local capital for development of big infrastructure projects in Nepal. The government is ready to allow IFC to sell bonds in local currency as the required amount could not be arranged for a few projects even through consortium of local financial institutions. The government in the budget for the current fiscal year, therefore, mentioned that international institutions with high credit rating will be allowed to issue bonds in local currency for long-term investment on big infrastructure projects.

    A team led by Vice President and Treasurer of IFC Jingdong Hua had visited Nepal last May. The team had met government officials, private sector representatives and investors to discuss about bonds to be issued by IFC. IFC has already invested around US$ 10 billion in issuing bonds in local currency of 60 countries in the past 10 years.

    The government, on the other hand, is encouraging Citizen Investment Trust (CIT), Employees Provident Fund (EPF) and Nepal Telecom (NT) for buying bonds while banks and financial institutions are also expressing interest to procure bonds to be issued by IFC and ADB. The concept of currency swap has also been forwarded to remove the risks of loan assistance provided by development partners willing to invest on big projects.

    Source : Karobar Daily