The government plans to retire some of its domestic debt starting next month, due to an influx of dollars into the market.
The long-awaited US$ 100 mn loan from Citibank is expected to come through within the next few weeks.rn
rnThe five-year syndicated loan, which is backed by Nippon Export Investment Insurance Company of Japan, was given the Presidential go ahead recently. The issue is now pending legal paperwork.
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rnThe cut on commercial borrowings come on the back of a promised second tranche of IMF funds, as well as other donor support which is expected to flow in later this year.rn
rnMarket watchers expect a Rs. 16 bn cut in domestic borrowings this year, due to the heavy dollar inflow.
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rnAnticipating a cut in the borrowing programme, there has been a steep drop in treasury yields this weeks auctions.rn
rnAt Thursdays bond auction, three-year yields fell 161 basis points to 7.44 percent and four-year issues dropped 172 basis points to 7.38 percent.rn
rnThe three-year auction was oversubscribed with Rs. 8.645 bn worth of bids, while the four-year bond issue attracted bids for Rs.
12.665 bn.rn
rnBut, the Central Bank offered and accepted bids for Rs. 2 bn for each issue. rn
rnIf anticipated foreign aid inflows materialise, analysts say domestic government debt issues are likely to be in short supply in the future.rn