88.2 Bln Yuan in Municipal Bonds Set to Expire
(Beijing) – With a new wave of stimulus expected on the horizon, local governments are still scrambling to pay off municipal bonds issued in response to the previous economic boost from the central government.
Municipal bonds worth a total of 88.2 billion yuan are set to mature between June and the end of September, the Ministry of Finance (MOF) said.
The debt represents only a portion of the 200 billion yuan in local government bonds issued by the MOF in 2009 as part of the 2008 stimulus plan. The three-year, fixed-rate bonds were issued at coupon rate between 1.6 percent and 2.36 percent.
The majority of provinces plan to finance the debt by issuing 2012 bonds. MOF has set a quota of 250 billion yuan for this year's local government bond issuance.
Gansu Province issued 7 billion yuan in local bonds in 2012. Provincial Province Department of Finance Director Zhang Qinghe said on May 29 the government plans to repay 2009 bonds by issuing an extra 4.34 billion yuan in provincial-level debt and 1.14 billion yuan in municipal debt.
This year, Hunan Province announced it would allocate 4.6 billion yuan from 11.5 billion yuan in new debt to finance previous debts.
Yang Hui, a fixed income analyst at Citic Securities, said bonds still represent a small proportion of local financing. The governments should continue to develop measures overseeing local government financing platforms.
In the early 1990s, a number of local governments were permitted to issue bonds to raise funds for infrastructure construction. The State Council ended this practice in 1993 over worries local governments could not repay.
The channel was reopened in 2009 though the MOF program, and last year four
provinces and municipalities – Guangdong, Zhejiang, Shanghai Shenzhen – were
among the first governments allowed to directly issue bonds.
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