The Finance Ministry has affirmed its commitment to the established government borrowing plan for the second half of the financial year 2024, with a target of raising Rs 6.55 crore as originally decided in March. However, this amount may see a reduction later if alternative revenue sources and deficit financing prove feasible, as revealed by reliable sources to Moneycontrol.
The central government aims to generate a total of Rs 15.43 lakh crore through bond sales in the financial year 2023-24, with a significant borrowing of Rs 8.88 lakh crore planned for the first half of the fiscal year.
The borrowing schedule indicates that the government will vend bonds weekly to fund its fiscal deficit. An announcement regarding financing for October 2023-March 2024 is scheduled for the end of September. Finance Ministry and Reserve Bank officials will convene in the final week of September to establish the borrowing calendar for the subsequent six months.
Decision Based on Small Savings Collection
The magnitude of market borrowing by the government holds substantial sway over the economy’s interest rates. Excessive government borrowing diminishes the fund availability for companies and escalates borrowing costs. Consequently, a reduction in government borrowing is seen as a positive indicator.
Recent weeks have seen speculations regarding the likelihood of low government borrowing from October 2023 to March 2024. Despite these speculations, the Finance Ministry remains reticent about signaling any borrowing reduction to the bond market when releasing the bond calendar for the second half of 2023-24. This strategic decision allows flexibility for a potential borrowing reduction at a later date.
However, the conclusive determination concerning borrowing adjustments is anticipated during the end-of-the-month meeting. A reliable source noted, “If there’s a necessity to reduce the loan amount, a decision can be made based on the trend of collection in small savings. Undoubtedly, borrowing won’t surpass the predetermined amount for 2023-24.”
A segment of the central government’s borrowing for October 2023-March 2024 will be financed through green bonds. These bonds were initially issued in the last quarter of 2022-23. However, the government expressed dissatisfaction with the premium acquired from green bond sales, prompting a potential auction of these bonds in the latter half of the financial year 2023-24.
For the financial year 2023-24, the central government initially aimed to raise Rs 25,000 crore through green bonds, following a successful Rs 16,000 crore raised in 2022-23. Recent reports, however, suggest a reconsideration of issuing green bonds for the fiscal year 2023-24.