The recent surge in government spending has led to a significant increase in fiscal deficit. To mitigate this, policymakers are exploring strategic borrowing options. By issuing long-term bonds, the government can lock in lower interest rates and reduce its debt servicing burden.
For instance, the 10-year bond yield has decreased by 1.5% over the past year, resulting in savings of $1.2 billion. Furthermore, the government can also consider issuing inflation-indexed bonds to attract investors and reduce its fiscal deficit. This approach has been successfully implemented in countries such as Australia and Canada, with notable reductions in their fiscal deficits.
By adopting a similar strategy, the government can narrow its fiscal deficit and promote economic growth.