The Government of Nepal has announced its plan to raise Rs 3.91 billion of internal debt. Nepal Rastra Bank (NRB) has confirmed that the internal debt will be mobilized through 91-day treasury bills (T-bills) that was announced on Monday.
Additionally, the NRB has stated that the government will discuss the renewal of T-bills amounting to Rs 20.50 billion. The renewal will include Rs 4 billion for a 28-day period, Rs 6.50 billion for a 91-day period, Rs 5 billion for a 182-day period, and Rs 5 billion for a 364-day period.
The government faced pressure in the previous fiscal year due to increased interest rates on internal debt. However, the recent decrease in interest rates has provided some relief. The average discount rates for T-bills include, 4.2964 percent for the 28-day T-bills, 7.0315 percent for the 91-day T-bills, 7.0252 percent for the 182-day T-bill and 7.1164 percent for the 364-dayT-bill.
Following NRB’s decision to increase the bank rate from 7 percent to 8.5 percent in the current financial year’s monetary policy, banks responded by raising the discount rate of T-bills to 13 percent. If NRB Reduces the bank rate during the third quarter review of the monetary policy, it is expected that the banks will lower the interest rate and invest more in T-bills instead of the reverse repo due to increased liquidity.
Last Thursday, NRB withdrew Rs 10 billion in liquidity through reverse repo, and an additional Rs 20 billion in liquidity will be withdrawn on Sunday.
