Issue of bond for overseas workers begins Wednesday

KATHMANDU, June 30: Nepalis working abroad can invest their earning in the five-year Foreign Employment Bond, for which government has promised the annual interest return of 9.75 percent, from Wednesday.



Even though the declared return stands almost close to double-digit figure, sources said its effective rate of return stands at around 9.16 percent only. [break]



Nepal Rastra Bank (NRB) has announced that Nepalis mainly in five leading overseas job markets -- Malaysia, United Arab Emirates, Saudi Arabia, Qatar and South Korea -- can subscribe for the bond over the span of next two weeks. “The issue will be done on July 16,” said an NRB official.



The investors can subscribe the bond in the name of family members back home, including minors. The central bank will register the securities for the secondary market transactions as well and bondholders can also enjoy loans against it.



However, contrary to the initial announcement of issuing bond worth Rs 7 billion, NRB has said it is opening subscription only for Rs 1 billion worth of bond.



It has designated more than half a dozen institutions, including Himalayan Bank Limited, Prabhu Finance Company, International Money Express (IME), Sewa Money Transfer, Prabhu Money Transfer, Incentive Money Transfer and Shramik Remit Company, for the issue.



The bond is being issued as a part of the government´s budgetary program, which is aimed at mobilizing domestic borrowing from the new source. The program aims to address concerns that remittances are just fueling consumption, and are not being used in productive sectors.



The government is hopeful that the option of bonds will open new avenues for the workers to invest their incomes in productive sector. Since the rate of return will remain unchanged throughout its tenure, it will also guarantee predictable returns for them.



The issue is being done by fixing pegged exchange rates and Nepali embassies in the issue country are facilitating the purchase of bonds, as cited in the budget statement for the current fiscal.



The government says the fund collected will be spent for the development of much-needed infrastructure in the country. However, it has not yet worked out specific projects for investment so far.



Sources, however, said there was actually no need to mobilize the fund through the bond. “Still we are moving ahead with the issue because we just want the program in the budget to be implemented,” the source said.



Nepal is currently receiving an average of Rs 18 billion in remittances from the overseas workers.

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