Consider the following statements regarding Medium Term Debt Management Strategy MTDS announce...........

Economic Affairs Public Finance and Debt Management

Consider the following statements regarding Medium-Term Debt Management Strategy (MTDS) announced by RBI :

1. This confirms that the debt is stable, sustainable over short run than long or medium run.

2. The debt management strategy revolves around only risk mitigation.

3. It is expected that the borrowing cost in the domestic market is expected to be lower in fiscal year 2015-16 due to reversal in the interest rate cycle

Which of the above statements are correct:

1 only

2 only

1 and 2 only

3 only

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Explanation:

Medium-Term Debt Management Strategy (MTDS)
• The Reserve Bank of India, in consultation with the Government of India, has placed Medium-Term Debt Management Strategy (MTDS) for a period of three years (2015-16 to 2017-18).
• The strategy document contains the objectives, risk analysis of Government borrowings and strategy to be followed.
• MTDS has been prepared based on sound international practices and taking into account the domestic economic and financial conditions.
• MTDS would be updated on an annual basis to reflect the emergent conditions.
• Government aim to better manage public borrowing, government plans to switch Rs 50,000 crore high cost debt each in year ending March 2017 and 2018 into instruments of longer term maturity
• It is expected that the borrowing cost in the domestic market is expected to be lower in fiscal year 2015-16 due to reversal in the interest rate cycle.
• The main objective of this policy is to smoothen redemptions, switching of short tenor bonds maturing at proximate years with long-tenor bonds will be undertaken and is expected to reduce rollover risks
• The debt management strategy revolves around three broad pillars ,viz.,low cost, risk mitigation and market development.