Excerpt from the budget speech (July 13, 2009, para 139) by the Nepal finance minister for the new fiscal year beginning this month:
"An arrangement has been made to issue "Infrastructure Development Bond" of an amount of Rs. 7 billion by Nepal Rastra Bank fixing pegged exchange rates targeting the Nepalese working abroad through Nepalese Embassies in South Korea, Malaysia, United Arab Emirates, Saudi Arabia and Qatar, as a part of domestic borrowing for the coming fiscal year. Such Bonds can be purchased only from workers working abroad. From this arrangement, the remittance can be used for infrastructure development and the remittance itself remains free of additional charges while transmitting to Nepal. In addition to it, I am confident that such workers employed abroad will receive interest from the day of bond purchase and be benefitted."
This is a welcome development in line with our thinking that the diaspora can be a significant source of development financing because migrant members tend to have money, and if a diaspora bond is sold in small denominations, then diaspora members can purchase them. They would also be willing to invest in their country when no one else does, because it is their own country, and they do have local currency liabilities that makes them less concerned about devaluation risks. Also a government is less likely to default to its own people. That said, debt can be dangerous if it is not carefully used for productive purposes, in this case, exclusively for Nepal's infrastructure development. These bonds have a better chance of success if they are marketed to the Nepalese diaspora alone, but I would not exclude other interested investors if any.
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