The Nepal Securities Board (SEBON) is set to enable local and provincial governments to raise direct investment for their infrastructure projects from the capital market by introducing ‘Municipal Bonds’.
The Securities Board of Nepal (SEBON) is preparing to create a system where local and provincial governments can directly collect investment from the capital market to run their infrastructure projects. This announcement was made through the Capital Market Policy for the fiscal year 2083/84, which the Board released. It aims to develop a legal and institutional framework for what it calls ‘Municipal Bonds’.
According to SEBON, these municipal bonds will help local levels reduce their dependence on central government budgets and bank loans. It will allow them to gather long-term financial resources. The Board emphasized that developing both municipal and provincial bond markets is a priority to meet the increasing development needs of local levels under the federal governance system.
Once this new system is in place, local governments will be able to raise debt through the capital market for a wide range of projects. This includes initiatives related to energy, drinking water, irrigation, health, education, transportation, urban infrastructure, information technology, and even environmental protection.
Ensuring Transparency and Investor Protection
SEBON has stated it will implement clear standards for issuing municipal bonds. These standards will cover important aspects like financial discipline, transparency, careful project selection, and public accountability. Furthermore, to protect the interest of investors, a credit rating will be mandatory before these bonds are issued. This rating shall evaluate the financial capacity and risk status of the concerned local government body.
Promoting Investment and Green Initiatives
To make the municipal bond market active, the Board has also adopted a policy to encourage institutional investors. Organizations such as the Employee Provident Fund, Citizen Investment Trust, Social Security Fund, insurance companies, and collective investment funds will be motivated to invest in this sector. In addition, there is also priority given to the development of ‘Green Infrastructure Bonds’ for projects that are friendly to the environment.
The Board plan to expand the bond market further by preparing the necessary regulations and procedures for government and institutional bonds within the upcoming year. There are also plans to make policy arrangements to connect projects operating under Public-Private Partnership (PPP) model with the capital market.
AI Disclaimer: This article was originally published on https://bajarkochirfar.com. It has been translated with the help of AI. For the best understanding and accurate facts, we recommend reading the original Nepali version.
