Current context: The Finance Minister has firmed her budget decision to borrow overseas sovereign bond in foreign currency.
a. Foreign currencies
a. Domestic currencies
b. Both a and b
c. Neither a nor b
- In her budget speech, Nirmala Sitharaman had said that the government would raise a part of its gross borrowing in external markets in external currencies.
- The then finance secretary Subhash Chandra Garg has said that the overseas borrowing would amount to more than $10 billion, about 10% of total borrowing for the year.
- In India presently the government only issues sovereign bonds in local currency in the domestic market.
- The real interest rate on Indian bonds is attractive as compared to other developed countries, and attracts foreign portfolio investor’s interest in Indian government bonds traded locally but they have to take the currency risk investing in rupee-denominated government bonds.
- The government’s decision to issue bonds in foreign currency would shift the currency risk from investor to the issuer (in this case, the government).
Question:
Q.1 The government in budget 2019 has decided to borrow overseas sovereign bond in?a. Foreign currencies
a. Domestic currencies
b. Both a and b
c. Neither a nor b
