MoF gears up to set up debt management division once again

Kathmandu, June 3

After putting the issue of establishing Public Debt Management Division on backburner for some time, Ministry of Finance (MoF) has once again geared up to open the unit.

“We have decided to revise the organisation and management (O&M) survey required to set up the unit and establish the division within September,” Krishna Prasad Devkota, head of the Economic Policy Analysis Division at the MoF told The Himalayan Times.

In January, the MoF had conducted O&M survey to establish the new division and decided to depute a joint secretary to head the unit. But, so far, the O&M survey has not been endorsed by the MoF.

Earlier, an MoF official had told THT that MoF had started rethinking on its previous decision to set up the division because ‘the size of country’s debt is comparatively small’ and MoF ‘didn’t want to establish the unit just for sake of it’.

“We are now planning to expedite the process of setting up the unit,” Devkota said.

In order to set up the unit, the MoF has already initiated the process of acquiring the software required for the office.

“We are now in the process of evaluating technical bid proposals submitted by four companies. Once this process is complete, we will evaluate the financial proposals submitted by those firms. We will then hand over the contract to design the software to the qualified bidder,” Devkota said, adding, “We hope to receive the tailor-made software from the contractor within November.”

Also, the MoF is planning to float tender notice to purchase the IT hardware required for the division within August. The government had floated the idea of setting up a debt management unit as early as August 2012 to consolidate debt management works scattered across MoF, Nepal Rastra Bank (NRB) and Financial Comptroller General Office (FCGO).

Currently, NRB raises domestic debt and maintains its data, while the International Economic Cooperation Coordination Division (IECCD) at the MoF deals with foreign loans. The FCGO, on the other hand, asks for data on domestic and foreign loans from the two institutions and compiles them.

After establishment of the new unit, the IECCD’s responsibility of mobilising foreign loans will be handed over to the Public Debt Management Division, while the FCGO will transfer its task of compiling data on the country’s debt to the unit.

Also, the new division will conduct studies prior to borrowing money from the market, diversify tools to raise debt and lay suggestions on use of different debt-raising tools on different occasions. It would also deal with international agencies and institutions to obtain foreign loans.

Besides, MoF is mulling over handing over NRB’s responsibility of raising domestic debt to the new division. The government has been raising debt since fiscal 1961-62 to finance budget deficit. In that year, it raised debt of Rs 8.2 million, of which Rs seven million was raised from domestic sources, while Rs 1.2 million was raised from foreign sources.

Since then the government’s debt volume has surged, yet it is still below 30 per cent of the gross domestic product, which means the country still has ample space to acquire loans to pursue development goals.

In this regard, the new debt management division will provide recommendations to the government on how, when and from where to borrow the money to support deficit financing.