The Hindu : Govt. to raise domestic debt to retire ADB, WB loans

Online edition of India's National Newspaper
Tuesday, Feb 25, 2003

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Govt. to raise domestic debt to retire ADB, WB loans

MUMBAI FEB. 24 . In line with its decision to prepay certain foreign currency loans of Asian Development Bank and World Bank, the Government will raise domestic debt of Rs. 13,000 crores through two new securities issued to the Reserve Bank of India on a private placement basis.

This debt issue will comprise two new securities — 6.72 per cent Government stock maturing in 2014 for an aggregate amount of Rs. 5,500 crores and 6.57 per cent GOI stock 2011 totalling Rs. 7,500 crores, the RBI said today. Any residual requirement of rupees would be met out of Government's cash holding, the RBI said, adding the date of repayment of external loans would be today and February 27 respectively.

Taking into account the strong forex position (at present over $75 billion) and lower interest rates in the domestic market, the Government had decided to prepay certain foreign currency loans from ADB amounting to $1.3 billion and World Bank amounting to $1.67 billion. It would purchase the foreign currency required for repayment directly from the RBI at the prevailing exchange rates.

The RBI said as fresh rupee borrowings by the Government would be used exclusively to retire an equivalent amount of debts in foreign currency with equivalent residual maturity, "the transactions will not have any fiscal implications.''

The monetary impact of the additional borrowing would be neutralised by an equivalent rupee payment by the Government to the RBI towards the purchase of foreign exchange.

The reduction in RBI's forex assets would be matched by a corresponding increase in domestic assets in form of G-secs acquired by way of private placements.

PTI

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