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Kathmandu Thursday April 05, 2001 Chaitra 23, 2057.
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NSCs issuance
gets overwhelming response
Post Report
KATHMANDU, April 4 - National Saving
Certificate (NSC), issued by the government to mobilise domestic resources to contain its
soaring overdraft, has received overwhelming response from the public.
The latest issuance of NSCs equivalent to Rs
1 billion was opened for the subscription from Wednesday for 6 days. However it was
completely signed up by the public on the very first day of opening.
The government shocked by the cold response
during the last issuance of NSC, in which only 30 per cent of the floated NSCs were
subscribed, this time pushed up the annual interest rate by half percentage to maintain it
at 9 per cent.
This 9 per cent interest offer is the prime
factor behind the overwhelming response shown by the general public. This even after
deducting income tax on the NSCs earning of 6 per cent, the effective rate would be 8.46
per cent, which is much more than present annual interest rate of the commercial banks
that is around 6 per cent.
"The increment in the interest rate by
half percent and notice in advance on the issuance of NSCs greatly helped to receive such
an overwhelming response", says Dibya Nidhi Bista, Director of National Debt
Department of Nepal Rastra Bank talking to The Kathmandu Post. He further said that
dwindling domestic stock market was also one of the causes behind such impressive
subscription, which provided a safe alternative investment opportunity to the speculative
investors.
In it last issuance, floated on the first
week of January, received a record-low response from the public. Of the floated NSCs
equivalent to Rs 1 billion at that time, only Rs 300 million were subscribed, raising
question on the government’s credibility in mobilising internal loan to finance
soaring government expenditure.
Low public participation in NSCs subscription
had perplexed the experts, given the background of excess liquidity and record-low
interest offered by the commercial banks.
The government issued the NSCs mainly to
repay its overdraft loans obtained from the central bank, which has crossed Rs 1.87
billion, despite its commitment to contain it below the one billion rupees mark.
Notwithstanding the bright revenue mobilisation, which has recorded a 19.7 per cent growth
in the first seven months of the current fiscal year, the government’s budget deficit
has crossed Rs 5.91 billion.
Ballooning regular expenditure fuelled by
quantum jump in security expenses is the main reason behind the rise in overdraft, says a
government official on condition of anonymity. Regular expenditure has increased by a
whopping 24.43 per cent during the last seven months.
NRB introduced NSCs as a new monetary instrument
in the fiscal year 1984/85 for the first time with an aim to enhancing domestic capital
mobilisation.
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