Kerala govt seeks Centre's nod to issue special pandemic relief bonds

The Kerala government on Thursday sought permission from the Centre to issue special Pandemic Relief Bonds in an effort to tide over the economic situation rising out of the coronavirus outbreak. At a press meet after the daily evaluation meet on COVID-19 pandemic, Kerala Chief Minister Pinarayi Vijayan said the state government has informed Prime Minister Narendra Modi about the economic crisis in the State following the spread of the virus.

All states are in financial distress as revenues have stopped and the public healthcare expenditure has increased manifold to contain the outbreak. "In this difficult scenario, we will have to borrow from the open market to continue the work and also to ensure that there is no break in our efforts due to lack of funds.

Therefore, permission may be granted to State Governments to issue special Pandemic Relief Bonds," Vijayan said. The state has also requested the Prime Minister to increase our borrowing limit to 5 per cent.

"Similarly, loans from external agencies for epidemic control measures and reconstruction activities may be exempted from the State's borrowing limit," he said, adding that the government was expecting a favourable response in this regard. Kerala Finance Minister Thomas Issac had also on Wednesday urged the Centre to allow states to launch 'pandemic bonds'.

On Tuesday, Kerala had to offer an interest rate of 8. 96 per cent for Rs 6,000 crore market borrowing or state development loan for a 15-year period.

The pandemic bond would effectively work like monetisation of fiscal deficit -- which means the central bank prints more money to pay for government debt by buying up government bonds and booking the same on its balance-sheet. The minister had said that the Rs 6,000 crore borrowed from the market on Tuesday is the Kerala's share in the first tranche of the Rs 1.27 lakh crore market borrowing that the Centre allowed for the states in 2020-21.

Paying 8.96 per cent interest for 15 years on this loan would leave the state in a deep debt trap from which it would be difficult to come out, Issac had said. He also called upon the Centre to monetise the debt by borrowing directly from the Reserve Bank and divide the amount among states.

The finance minister also said that the chief minister would request the Centre to hike the ceiling on states' fiscal deficit to 5 per cent from the present 3 per cent to tide over the deep financial constraints arising from the coronavirus pandemic. The proposal comes against the backdrop of states looking to raise money to fund measures to deal with the coronavirus pandemic, which has resulted in more than 5,700 cases of infections across the country.

Besides, the 21-day nationwide lockdown to curb spreading of the infection has caused economic disruptions.PTI RRT SS PTI PTI.

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