THE State will not borrow more than $195 million even if there is a lot of interest in the Fiji Infrastructure Bond.
"Government will not borrow beyond the $195million that has been approved by Cabinet for 2012," Finance permanent secretary Filimone Waqabaca said in response to questions raised on the $20m Fiji Government Viti Bond float.
"So, even if the bonds are oversubscribed, our acceptance will still be within the approved limit," Mr Waqabaca said.
He said the FIB issue, which is $175million, would be floated in the market during specific intervals.
The government had announced during the 2012 Budget that it would borrow $195 million domestically to fund its capital works.
"The government finances its deficit by raising money from the market through issue of securities, which in Fiji's case is called Fiji Infrastructure Bond," Mr Waqabaca said.
"Government ensures that the revenue generated is sufficient to cover operating expenditure.
"So, the funds raised through the FIB is directed at capital projects or infrastructure development and not to fund the operating costs of government."
Mr Waqabaca said there was surplus liquidity - currently over $500million - in the financial system and as such institutions were looking for attractive investments.
"Given the high liquidity, we expect the bond issues to be over-subscribed. We have been experiencing this trend during this high liquidity overhang that we have in Fiji," he said.
Mr Waqabaca said the government would look at the interest cost and decide on whether to accept more bids in the event the bonds were over subscribed.
"For example, if government floated a $20 million FIB bond and receives $30 million, we could accept more if we feel that the interest rate is favorable. The sum of all bond float and accepted cannot exceed $195 million," he said.
"The government bond is a safe investment. Fiji thrives on the fact that we have never defaulted on our borrowings unlike what we are seeing in some developed countries in Europe that has triggered the crisis.
"Fiji's debt to GDP ratio is 52 per cent and our target is to reduce this level to around 40 per cent.
"Bulk of this debt, around 80 per cent, is raised domestically through government bonds."
Fiji's debt level at December 31 last year was $2.7billion, at least $2billion is with the Fiji National Provident Fund.