Nepal | August 22, 2019

ADB to sell Nepali bonds in foreign markets

Rupak D Sharma

Nadi (Fiji), May 5

The Asian Development Bank is planning to float Nepali rupee-denominated bonds of up to $500 million in the overseas market to raise funds for construction of physical infrastructure projects in Nepal.

The Manila-based multi-lateral lending institution had expressed this interest upon Finance Minister Yubaraj Khatiwada’s request.

The minister had told the ADB that the long overdue plan to issue local currency bonds should now be rolled out as Nepal needs capital for longterm investment. But these securities, the minister said, should not be sold in the domestic market until the problem of shortage of loanable funds is fully resolved.

He had made these remarks during talks with officials of the Treasury Department of the ADB on the sidelines of the multilateral lender’s 52nd Annual General Meeting, which concluded yesterday in the Fijian city of Nadi.

Shortly after the request was made, ADB Treasurer Pierre Van Peteghem told THT that the ADB was ‘considering the possible issuance of Nepali rupee denominated bonds in the offshore capital markets’. “This will support the bank’s non-sovereign (private) operations in Nepal,” Peteghem said today via email.

The government in 2015 had allowed the ADB and the International Finance Corporation, the private sector lending arm of the World Bank, to issue local currency bonds worth $500 million each.

Initially, the two organisations were planning to float those instruments in the domestic market. But amidst shortage of loanable funds triggered by rapid credit expansion and slow deposit growth the government has asked the ADB to sell these instruments abroad. This means the IFC will also have to reach out to investors in the international market if it intends to raise funds using those instruments.

“The bonds can be bought by non-resident Nepalis, as well as well-wishers of Nepal, in international capital markets,” Minister Khatiwada told THT on the sidelines of the ADB’s annual meeting in Fiji. “The ADB has said it would soon send a delegation to Nepal to discuss this issue.”

The funds raised through sale of bonds would be invested in physical infrastructure projects via the private sector. This initiative, many say, would help Nepal bridge the investment gap in the physical infrastructure sector to some extent.

Many Asian countries have been issuing bonds to finance infrastructure projects. Countries like Malaysia even issue bonds for specific projects.

Most of these countries prefer issuing bonds in local currency as they are immune to sudden hike in value of the US dollar.

 


A version of this article appears in print on May 06, 2019 of The Himalayan Times.


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