The government could raise around $10 billion from the issuance of its first overseas sovereign bond, as it expects a great enthusiasm for its securities in the foreign market.
In an interview to FE on Saturday, finance secretary Subhash Chandra Garg sought to dispel misconceptions that tapping the overseas market will lead to the inflows of ‘hot money’ that is volatile in nature.
“This is not hot money at all. If you issue a 10-year bond, somebody subscribes to it in foreign currency. The government is required to pay only after 10 years.” The government would most likely
finalise the design of the bonds this month.
Analysts have said the move will ease pressure on local bond markets, while enabling the government to borrow cheaper funds from overseas. The government has budgeted its FY20 gross market borrowing at `7.10 lakh crore and net market borrowing at `4.73 lakh crore.
Commenting on the dividend from the Reserve Bank of India (RBI) to the government, Garg said Friday’s Budget has pegged the transfer at `90,000 crore for the current fiscal, against `68,000 crore in FY19. However, the government hasn’t factored in any potential extra transfer of reserves, as the deliberations of the Jalan panel on the central bank’s economic capital framework were still going on, Garg said. The panel’s next, and possibly final, meeting will take place on July 17.
While Garg is reported to have dissented from other members on the potential size of transfer, he called these reports speculative.