Govt unveils Medium-Term Debt Management Strategy

With an aim to better manage public borrowing, government plans to switch Rs 50,000 crore high cost debt each in 2016-17 and 2017-18 into instruments of longer term maturity.
While releasing Medium-Term Debt Management Strategy (MTDS), the Finance Ministry said the objective of the debt management strategy (DMS) is to secure the government's funding at all times at low cost over the medium /long-term while avoiding excessive risk.
The MTDS is developed for the period 2015-16 to 2017-18 based on the outstanding government market borrowing as on end-March 2015.
"Switches of Rs 30,000 crore are expected to be conducted in 2015-16 and Rs 50,000 crore each in 2016-17 and 2017-18," said a scenario analysis appended as part of the MTDS document.

It also said the borrowing cost in the domestic market is expected to be lower in 2015-16 due to reversal in the interest rate cycle.
"With an objective to smoothen redemptions, switching of shorttenor bonds maturing at proximate years with long-tenor bonds will be undertaken and is expected to reduce rollover risks.

"To take the process forward, 'switch calendar' would be announced with a focus on effective liability management," the Ministry said.
Government resorts to market borrowings to meet its fiscal deficit.
The MTDS has been prepared in consultation with the Reserve Bank of India.
The strategy document contains the objectives, risk analysis of government borrowings and strategy to be followed. MTDS is in consonance with the Medium-Term Fiscal Policy Statement (MTFPS).

MTDS has been prepared based on sound international practices and taking into account the domestic economic and financial conditions.
The Budget for 2015-16, in the Medium Term Fiscal Policy Statement (MTFPS), has provided that government would be on the fiscal consolidation path by reducing the GFD to 3.9 per cent of GDP in 2015-16 from 4.1 per cent in 2014-15.
As per MTFPS, GFD is targeted for 3.5 per cent in 2016-17 and at 3 per cent from 2017-18 onwards.