Prime Minister’s Office not in favour of forex-denominated sovereign bonds

New Delhi: The Prime Minister’s Office (PMO) is in favour of the government issuing rupee-denominated bonds overseas, instead of foreign exchange denominated bonds proposed in the Union Budget, a source aware of the development said. “The PMO had recently written to the finance ministry asking it to go for a rupee-denominated bond instead of an issue that is in foreign currency,” the source said. The PMO has favoured a rupee-denominated or Masala sovereign bonds after taking feedback from stakeholders following the Budget announcement, the source said. The Budget for 2019-20 (Apr-Mar) had proposed raising part of the government's market borrowing from overseas markets.

The Indian government has never issued sovereign bonds overseas. The last time the government actively considered issuing sovereign bonds overseas was in 2013, when the Indian rupee took a severe beating in the aftermath of taper tantrums. The government is planning to raise about 10% of the gross market borrowing of Rs 7.10 trillion through overseas bond issuance in 2019-20, former Economic Affairs Secretary Subhash Chandra Garg had said after the Budget presentation.

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