In the budget, we asked the question: Is a 30,000 cr. debt switch planned for March? Of course it was, it turns out. The government was looking to switch debt worth 30,000 cr. from an immediate repayment (FY 2016) to a later year. And here’s why: Government Debt maturity by Financial Year On Friday the RBI switched out 30,228 cr. worth securities from the FY 2016 to Fy 2027. This means the government effectively bought back securities worth Rs. 30,228 cr. maturing FY 2016, and issued new securities maturing FY 2027 in exchange. Whatever is repaid has to be re-borrowed because our governments are big ponzi-type schemes – debt can only be paid by issuing more debt. So a “shuffle” in maturity patterns can lead to smoother redemptions and reissues; essentially the government will need to reissue 30,000 cr. lesser of new bonds because of this swap. But what’s the big deal? … (Read On…)
[via Capital Mind]
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