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HindustanTimes Thu,21 Aug 2014

Govt to raise $4.3 bn special loan from World Bank

Chetan Chauhan, Hindustan Times  New Delhi, September 11, 2013
First Published: 01:52 IST(11/9/2013) | Last Updated: 01:55 IST(11/9/2013)

The Union cabinet on Thursday will consider the finance ministry’s proposal to seek $4.3 billion from International Bank for Reconstruction and Development (IBRD) as special private placement bond. This will enable India to have additional borrowing space over and above the single borrower limit.

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The cabinet will also take a call on capital funds to India Infrastructure Finance Corporation Ltd (IIFCL) for more financing of infrastructure projects in the current financial year. A similar additional capital funds are to be provided to Export Import Bank of India.

The cabinet will also take a call on setting of semi-conductor wafer fabrication manufacturing facilities in the country.

In a bid to provide additional funds for core sector projects, World Bank will issue $4.3 billion special private placement bonds to enable India mop up resources over three years.

The special bonds will help in injecting more liquidity. World Bank’s private placement bonds are special instruments that allow countries to dig deep into the pool of global savings to fund long-gestation projects and also bolster foreign exchange inflow.

State-owned IIFCL is finalising the broad contours of a multi-billion dollar bonds through which it will borrow money from foreign investors for India’s cash-starved infrastructure sector.

The resultant inflow of dollars will also help prop up the rupee, which has slid 20% since April and stoked inflation by increasing prices of most imported goods, including crude oil and gadgets. Last month, the government allowed public sector companies Indian Railway Finance Corporation Ltd  IRFC, Power Finance Corp (PFC) and IIFCL to collectively raise $4 billion (about R26,000 crore) through quasi-sovereign bonds for the infrastructure sector. Such proxy sovereign bonds will allow the government to dig into the pockets of foreign pension and institutional funds to stem the rupee’s slide.


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