MOF floats $160 bln in local gov't debt-swap bonds   

财政部推万亿置换债券

(ECNS) – The Chinese Ministry of Finance (MOF) on Thursday said it will issue 1 trillion yuan ($160 billion) of low-yield bonds in a local government debt-swap plan approved by the central government.

It will partly ease pressure on local governments caused by legacy liabilities and won't push up this year's fiscal deficit, according to the ministry.

"The swap is just a change of the debt form and won't increase liabilities, and therefore it won't boost this year's fiscal deficit," the Xinhua News Agency reported, citing a Finance Ministry official.

The swap targets audited local government debts that were borrowed by June 30, 2013 and come due this year, and can only be used for that purpose, the ministry said.

The swap covers 53.8 percent of total local government liabilities that will be due in 2015, and the bonds will be issued by and repaid by local governments themselves, according to the ministry.

Earlier this week, domestic media speculated that the swap would be for 3 trillion yuan of local government debts.

Industry insiders say that through the swap plan, local governments can replace part of their high-interest loans with low-yield bonds, easing repayment pressures and also greatly reducing bad-debt risks faced by the banking sector.