Kerala, which has close to 2 million migrant workers in the West Asian region and is among those worst hit on account of the Covid-19 -linked drop in global remittances, is gearing up to seek regulatory approvals shortly to issue ‘diaspora bonds’.
While the state government, in collaboration with The World Bank, has been toying with the idea of issuing these specialised bonds, the pandemic has only added to the urgency to launch the bonds. These bonds will tap into the savings of non-resident Keralites, a majority of whom are in the Gulf Cooperation Council (GCC) countries, where their deposits in banks earn near-zero per cent interest.
“KIIFB will issue the bonds… They will have to take necessary clearances from RBI, etc. The pandemic has only added urgency to the bonds,” Kerala Finance Minister T M Thomas Isaac told The Sunday Express. KIIFB, or the Kerala Infrastructure Investment Fund Board, is a statutory body under the state government’s Finance Department and has issued a tender inviting a consortium of lead managers for the proposed issue.
“The World Bank is actively engaged with the government of Kerala to build resilience to natural disasters since the great floods of 2018. The (Kerala) government… this year issued an order designating KIIFB as the nodal agency to issue a diaspora bond. There was also a decision to issue the diaspora bond in rupee terms and to market it among non-resident Keralites and non-resident Indians, most of whom are in the Gulf Cooperation Council countries,” according to Dilip Ratha, World Bank lead economist on migration and remittances.
The diaspora bond will, alongside mobilising financial resources for development in Kerala, will also build a long-term bridge to its diasporas abroad, who are a key stakeholder in the state’s development efforts, Ratha said.
While remittances data by states in India is not generally available, Ratha said that going by Kerala migration surveys and World Bank staff estimates, remittance flows to Kerala in 2018 was estimated at $13 billion and around $14 billion in 2019.
Kerala and Punjab are two of the largest remittance recipients among Indian states, where a large number of households rely on remittances and a drop in inflows are likely to result in disruptions to their financial lifelines, affecting their ability to consume, afford healthcare, and education.
India, the world’s top recipient of remittance transfers, took in $83 billion as remittances from workers abroad last year, and is projected to see a 20 per cent drop in remittances this year.
Kerala, which accounted for over 15 per cent of India’s total inflows, could be among the worst impacted states on account of the drop in global remittance inflows.
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