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Govt repaid $500 mn external debt in 2001-02

Even though the government repaid $500 million worth of external debt in 2001-02, India is still the world's tenth-largest debtor nation.

"The government has been prepaying many other multilateral loans and external commercial borrowings. This is a continuing process," Finance Minister Yashwant Sinha said on Friday.

But he said the government was "concerned and worried about the stock of internal debt" and the high fiscal deficit.

India's external debt as of September 2001 totalled $100.4 billion and most of it was made up of government debt, making it the world's tenth-largest debtor nation.

The Reserve Bank of India Governor, Bimal Jalan, said in April the Reserve Bank of India had urged the government to pay in advance its external debt wherever possible.

Analysts said record foreign exchange reserves and comfortable external position prompted the central bank to tell the government to repay some of its costlier debt in advance.

India's foreign exchange reserves topped $55.6 billion on May 11 on higher foreign investments, both portfolio and direct flows, along with steady remittances from expatriate Indians.

A large part of these inflows were absorbed by the central bank, helping it shore up India's foreign exchange reserves.

Last month, state-run Oil and Natural Gas Corp said it planned to repay high cost foreign loans worth $510 million by July. These loans were to be repaid between 2010 and 2040.

Sinha told Parliament an expert panel had been set up which was examining the issue of pre-payment of costly external debt.

But he said the government was "concerned and worried about the stock of internal debt" and the high fiscal deficit.

India faces a challenge in bridging its gaping fiscal deficit which analysts say stops the economy from going full throttle.

The fiscal deficit is estimated to have widened to 5.7 per cent of gross domestic product (GDP) in 2001-02 (April-March). The government aims to contain the deficit at 5.3 per cent of GDP in the current financial year, which began on April.

Rating agencies have been citing the huge deficit as a major hurdle in upgrading India's current junk bond status rating.

Sinha said the government was considering amendments suggested by a parliamentary panel which examined the contents of the Fiscal Responsibility and Budget Management Bill 2000.

"The amendments are being examined and once we are ready we will bring it before the House (Parliament)," Sinha said.

The parliamentary panel last year softened the legislation aimed at keeping a close watch on central finances and scrapped clauses binding the government to deficit cuts.

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