The Asian Development Bank (ADB), the multilateral donor agency, has proposed to issue local currency bonds worth Rs 50 billion mainly to finance various hydropower projects here.
The ADB has filed an application at the Ministry of Finance in this regard, seeking permission to float the bonds over the next few years to fund eight hydropower projects.
“We will review the application and send it to the Cabinet for approval soon,” a high-ranking Ministry of Finance (MoF) official told The Himalayan Times on condition of anonymity.
If the permission is granted, the ADB will become the second international financial institution to receive the government’s nod to raise money from the domestic market to finance various development projects.
Earlier in April, the Cabinet had extended permission to the International Finance Corporation (IFC), the private sector lending arm of the World Bank, to float local currency bonds worth up to $500 million.
However, IFC still has not been able to issue the bonds due to delay in revision of certain regulations, like the one enforced by Securities Board of Nepal, which still does not allow listing and trading of local currency bonds on the secondary market.
Once these issues are settled, international financial institutions like the IFC and ADB will be able to float bonds depending on demand for credit from the private sector.
However, both the ADB and IFC have not clearly mentioned yields on bonds they are planning to float and their maturity period. Also, the rate at which they plan to buy funds from the market and the rate at which they plan to sell these funds to the private sector have not been fixed.
Institutions like the ADB and IFC now have the flexibility to raise money from the domestic market following issuance of a guideline on local currency bonds by the MoF in October last year. As per the guideline, only international financial institutions with AAA credit rating from global credit rating agencies can float such debt instruments here.
The MoF, in its guideline, had stated that those interested in floating such bonds can file applications mentioning objective behind issuance of bonds, potential investment sectors, major investors, quantity of bonds to be issued, their maturity date, coupon rates and interest spread.
The ministry hopes this facility will facilitate collection of large sums of money required for construction or implementation of huge projects. This will also allow the government to mobilise additional funds from domestic sources, reduce country’s reliance on foreign loans, open new investment avenue for institutional investors, prop up country’s capital market and provide another tool for liquidity management.
source: the himalayan times,31 july 2014
LINK
The ADB has filed an application at the Ministry of Finance in this regard, seeking permission to float the bonds over the next few years to fund eight hydropower projects.
“We will review the application and send it to the Cabinet for approval soon,” a high-ranking Ministry of Finance (MoF) official told The Himalayan Times on condition of anonymity.
If the permission is granted, the ADB will become the second international financial institution to receive the government’s nod to raise money from the domestic market to finance various development projects.
Earlier in April, the Cabinet had extended permission to the International Finance Corporation (IFC), the private sector lending arm of the World Bank, to float local currency bonds worth up to $500 million.
However, IFC still has not been able to issue the bonds due to delay in revision of certain regulations, like the one enforced by Securities Board of Nepal, which still does not allow listing and trading of local currency bonds on the secondary market.
Once these issues are settled, international financial institutions like the IFC and ADB will be able to float bonds depending on demand for credit from the private sector.
However, both the ADB and IFC have not clearly mentioned yields on bonds they are planning to float and their maturity period. Also, the rate at which they plan to buy funds from the market and the rate at which they plan to sell these funds to the private sector have not been fixed.
Institutions like the ADB and IFC now have the flexibility to raise money from the domestic market following issuance of a guideline on local currency bonds by the MoF in October last year. As per the guideline, only international financial institutions with AAA credit rating from global credit rating agencies can float such debt instruments here.
The MoF, in its guideline, had stated that those interested in floating such bonds can file applications mentioning objective behind issuance of bonds, potential investment sectors, major investors, quantity of bonds to be issued, their maturity date, coupon rates and interest spread.
The ministry hopes this facility will facilitate collection of large sums of money required for construction or implementation of huge projects. This will also allow the government to mobilise additional funds from domestic sources, reduce country’s reliance on foreign loans, open new investment avenue for institutional investors, prop up country’s capital market and provide another tool for liquidity management.
source: the himalayan times,31 july 2014
LINK
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