According to finance ministry officials, the government is also encouraging the corporate sector to pre-pay debts or swap them with cheaper debts. The officials said interest rates are ruling low and the corporates should take advantage of the situation. Corporates, however, will have to generate rupee resources to pre-pay debts. The government, officials said, is also asking the public sector to retire expensive external debt.
As far as the government is concerned, they said, divestment receipts will be utilised for pre-paying external debts. Although pre-payment of external debts attract penalty, they said, “sometimes it makes economic sense to pay penalty and get rid of the high-cost debts”.
The country’s total external debt is around $100 billion and the forex reserves are more than $57 billion.