How good or bad is the Budget Decision to Issue Foreign Currency Debt?


The 2019 budget was full of surprises. There were many reforms introduced. One such reform that shocked the financial plan is the Government’s decision to issue foreign currency debt. Previously the Government borrowed monetary reliefs from the traditional institutions like the World Bank in its currency. But with the new reform, India can now borrow money from whomever it wants in its local currency. Financial analysts speculate that the move comes in the response of Governments low securities in the domestic market. The following move will boost the economy to great heights.

On the other hand, some financial analysts are a pessimist about the bold move. They claim that the current healthy state in the sovereign external debt is low just because the policymakers were worried about the risks — the chief factor being the risk of issuing foreign currencies. In his statement, the finance minister had quoted that the limited access to external debt from the bigger financial institutions had capped the growth of debt. This also ensures that the country cemented its position in the international financial market.
The international market had its fair share of opinion. The argument that the interest costs less when borrowed in the local currency is a myth. In the long run, the domestic rupee is bound to depreciate, and this will impact the debt, The country would have to repay substantial principal form its pocket. A nation takes the following step only when the country is not capable of issuing its currency.

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