New Delhi: Government plans to frontload its market borrowings programme and will raise Rs 4.42 lakh crore in the first six months of FY20. This would mean that Centre would be borrowing about Rs 17,000 crore per week.
The FY20 borrowing amounts to 62.3 per cent of the full year target. This is nearly 54 per cent higher than the Rs 2.88 lakh crore borrowed in the same period in FY19. In FY19 government had completed only 47.56 per cent of its annual gross borrowing in H1.
The government’s gross borrowing for FY20 is pegged at Rs 7.10 lakh crore, while net borrowings are seen at Rs 4.23 lakh crore.
“We will borrow Rs 4.42 lakh crore via Gilts in the H1 (April-September ) period of 2019-20 fiscal. This means we will borrow 62.3 per cent in the H1 and Rs 2.68 lakh crore in the H2 of FY20,” Economic Affairs secretary Subhash Chandra Garg said.
IANS had on March 10 reported government will borrow 60 per cent of the gross borrowing in H1 of the current fiscal amounting to Rs 4.3 lakh crore.
Government normally completes about 60 per cent of its borrowings in April-September period of a financial year, when liquidity conditions are easier. However, in FY19 borrowings were pushed back as market conditions were adverse and bond yields were high.
Higher borrowings increase the supply of government bonds pushing up bond yields making market borrowing programme expensive.
In FY20, the higher gross borrowing is also on account of higher redemption pressure on its dated bonds. Over the last two years, the government has tried to spread out the upcoming redemption pressure by switching existing bonds with longer tenor securities.
The total redemption pressure the government faces in FY20 is Rs 2.37 lakh crore. So there will be ‘switch’ calendar in the H1 but Garg did not give the amount kept for this.
Sources said the ministry may ‘switch’ up to Rs 70,000 crore of bonds with longer tenor securities to manage the Rs 2.37 lakh crore redemption pressure in FY20. It will also seek the Reserve Bank of India’s (RBI) open market support in a large-scale amount to contain the bond yields and maintain liquidity.
The ‘switch’ transaction generally happens with the RBI and does not disturb the market for funds. In the current fiscal, the switch was to the tune of Rs 28,000 crore.
Explaining the reasons behind borrowing over half the funds in the H1, Garg said government has a repayment obligation of Rs 2.37 lakh crore in the fiscal 20 and in H1 , the ministry will have oblige repayment of Rs 1.02 lakh crore in H1 and Rs 1.35 lakh crore in H2.
For the entire fiscal and the gross borrowing is Rs 7.1 lakh crore andA net borrowing is Rs 4.23 lakh crore. Gross borrowing includes repayments of past loans. Net borrowing is mainly used for meeting fiscal deficit target.
The government had borrowed just 47.5 per cent of its budgeted full-year target (gross) through bonds in the first half of 2018-19 — much lower than the 60-65 per cent in the corresponding periods over the previous five years.
It had dipped more into the National Small Savings Fund (NSSF) in FY19 to finance the fiscal deficit as it sought to ease pressure on the bond market that has witnessed a spurt in yield that time.
