Govt borrowed close to $10 billion from Multilateral Agencies in FY’21 to Fund Projects

The Indian government’s external borrowing hit a decade high as the country relied on multilateral agencies to combat the Covid-19 outbreak.

Last fiscal year, the government overcame its resistance to borrowing money from abroad in unusual circumstances to raise $9.4 billion. The majority of these borrowings were for COVID and development-related projects, and they were projected to have covered around 3 to 4% of the year’s revised fiscal deficit.

As of March 2021, outstanding multilateral government debt totaled $57.7 billion, up from $48.3 billion in March 2020, resulting in recent net borrowing of $9.4 billion over the fiscal year. In addition, the federal government borrowed $2.5 billion in bilateral loans and $209 million from the IMF.

The increase is unlikely to cause worry because multilateral, bilateral, and IMF borrowings account for less than a fifth of total external debt, compared to industrial borrowings and non-resident deposits, which account for more than 60%. “The high growth in the Forex reserves stock last year also aided in improving the external debt coverage ratios,” Rao said.