Government to repay fiscal's 1st sovereign debt on June 3

The redemption of the governments sovereign debt has started as the Finance Ministry on Monday said the outstanding balance under 7.28 per cent GS 2019 bonds will be repayable on the effective date of repayment on June 3.

"The outstanding balance under 7.28 per cent GS 2019 will be repayable on the effective date of repayment on June 3," the Finance Ministry said.

This is the first issue of the current fiscal set for maturity and the total outstanding stock is Rs 42,038 crore, as per the Department of Economic Affairs' list of government securities outstanding. 

The government has made enough provisions in the borrowing programmes to meet the redemption target.

The gross borrowing is Rs 4.42 lakh crore during April-September of 2019-20. As per the Union budget, the gross borrowing was pegged at Rs 7.1 lakh crore for 2019-20, higher than Rs 5.71 lakh crore estimated for the ongoing fiscal. Gross borrowing includes repayments of past loans.

According to the ‘Medium Term Fiscal Policy Statement' of the interim budget, the government said it had budgeted for repayments of Rs 2,36,878 crore in 2019-20. This redemption pressure is one reason why gross borrowings in FY20 are pegged at more than Rs 7 lakh crore, even though net borrowings are broadly stable.

The amount of sovereign government debt maturing is set to rise significantly between 2019-20 and 2022-23.

While the government will face no issues refinancing this debt since this is all domestic debt, the increased fresh borrowings could put pressure on bond yields. But even that will even out as borrowings are already planned for the H1. 

Over the last two years, the government tried to spread out the upcoming redemption pressure by ‘switching' existing bonds with longer tenor securities. This, however, has seen limited success as it is always a bilateral issue. For the current fiscal, the switching is Rs 50,000 crore.

The status paper on government debt of January shows that the redemption pressure will continue to rise over the next few years, peaking at about 7.76 per cent of the outstanding stock of government debt in 2022-23. IANS