Government's H2FY26 borrowing outlook shows focus on stability and lower costs: Report

New Delhi [India], October 1 (ANI): The central government's latest borrowing outlook for the second half of current financial year (H2FY26) showed that while the government continues to borrow heavily to meet expenditure needs, it is also taking steps to keep costs stable and spreads manageable, highlighted a report by Bank of Baroda.
The central government has set its gross borrowing target for the second half of FY26 at Rs 6.77 lakh crore, taking the total for the full year to Rs 14.72 lakh crore. This figure also includes Rs 10,000 crore under sovereign gold bonds.
The report stated "The total allocation for 10Y securities has been higher in H2FY26 against H1FY26. Notably, there has been preference for the short term securities as has been evident from the higher share of allocation for securities with shorter tenor".
The share of borrowing in the second half stands at 46 per cent of the full-year target. This is slightly higher than the long-run average for H2.
This pointed out that the government has continued its practice of borrowing more in the first half of the year, while keeping the second half somewhat lighter to manage repayments and market liquidity.
The borrowing pattern for H2FY26 shows a clear focus on 10-year securities, which have been given a higher allocation compared with H1. These bonds act as a benchmark for the debt market, and the increase in their supply has already helped bring down yields.
There is also a visible preference for shorter-tenor bonds, such as 3-year and 5-year papers. Their share has increased to 6.6 per cent and 13.3 per cent in H2, compared with 5.3 per cent and 11.3 per cent in H1.
On the other hand, the allocation for ultra-long bonds of 40 and 50 years has been reduced slightly, which suggests that the government is trying to strike a balance between short-term funding and long-term repayment pressures.
Another feature of the borrowing plan is the use of switch auctions, which help in spreading out repayments and managing costs. In H1FY26, switches worth Rs 89,907 crore have already been conducted.
With larger repayments expected in the second half, the report mentioned that the number of such switches is likely to rise further.
Overall, the outlook suggests that the government is trying to manage borrowing in a way that keeps costs in check, supports market stability, and pushes larger repayments into the future. (ANI)