Nepal clears a rupee bond that lets firms borrow without dollar risk

The government has cleared the International Finance Corporation (IFC) and the Asian Development Bank (ADB) to each issue Rs 20 crore of rupee-denominated bonds in international markets, the Finance Ministry said, opening a channel through which Nepali infrastructure developers could borrow long-term money without carrying currency risk.

For a market where almost all long-term private capital is raised through shares on the NEPSE, the instrument offers a different, non-equity source of financing. The ministry cautions that it is early: no investor has begun the process, and permission alone does not guarantee a sale.

Under the structure, IFC and ADB would raise money abroad in dollars or other currencies, then lend it to Nepali projects in rupees. Principal and interest would be repaid in rupees, so a borrowing project would not take on the extra cost when the dollar strengthens. Officials describe it as the first time such a facility has been tried in the country.

The bonds would be private, not sovereign. The finance minister flagged the plan in the budget presented in late May (Jeth), and the ministry granted the two lenders permission in August. Neither has yet selected a project to fund.

In parallel, the government has agreed terms with the World Bank for a separate instrument, a catastrophe bond that would secure reconstruction money if a major earthquake struck. A preliminary World Bank estimate put coverage at about Rs 12 arba for a one-in-20-year quake and up to Rs 28 arba for a one-in-100-year event, against an outlay of roughly Rs 3 arba over a three-to-five-year term.

The terms, installment amounts and maximum payout on both instruments are still to be set in further talks. The picture changes when the first investor commits or IFC and ADB name a project to finance; until then, the clearance is an opening, not a flow of capital.