Government debt abroad: Why & how

Nurturing a relationship with foreign investors is particularly important when it comes to the long-term objective of borrowing in times of a calamity

There are three reasons in favour of a government borrowing abroad. Such borrowing will sometimes yield lower-cost financing for the government. It will produce a reference rate that improves the ability of Indian corporations to borrow abroad. Most important, when India is in a crisis, and a large surge in the deficit is required, it will create a way to obtain large quantities of debt at a low price. There are two caveats. Better institutional arrangements are required for debt management. We have to play the long game by nurturing the foreign investor base and winning their trust.
 
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