Debt Management Analysis of Nepal's Public Debt
This paper estimates an optimal target portfolio of sovereign debt for Nepal that minimizes long-term financing cost. In the analysis, a practical framework is applied, which is built upon the traditional mean-variance efficient frontier approach and simultaneously employs a relatively new concept of cost-at-risk (CaR). The framework is flexible enough to incorporate other factors such as liquidity risk. Simulation results show that the Nepali economy needs to increase longer-term domestic borrowing instruments, and that the maturity structure of domestic bonds should be simplified. The simulation also suggests an optimal currency composition of external debts in Nepal.
- Outline of Methodology
- Efficient Frontier and Benchmark Portfolio for Domestic Government Debt
- Efficient Frontier and Benchmark Portfolio for External Government Debt
- Concluding Remarks