ANHUI Province plans to swap 32.2 billion yuan (US$5.22 billion) through the Central Government’s new debt swap scheme to allow local governments to convert high interest debt to lower interest bonds, Xinhua said Saturday.

    Anhui would be amongst the first regions approved to use of the 1 trillion yuan scheme, designed to help ease the massive debt burden on local governments without crippling the broader economy.

    Local government debt is estimated at around US$3 trillion.

    The scheme, announced last month, allows local governments to convert a portion of their maturing high-interest debt into lower interest municipal or provincial bonds.

    Anhui will use the funds to repay debt due to mature this year, Xinhua said, citing Anhui officials. It added the debt swap would help lower the government’s financing costs.

    Local government finances have been strained over the past year as the non-bank financing platforms they have relied upon to plug holes in their budgets have become a target of regulators concerned with surging local government debt.

    In December, regulators banned the use of debt with a rating below AAA in short-term repurchase agreements, used by financial institutions to cover temporary funding short-falls. Many local government financing vehicles have ratings of AA, essentially locking them out of the short-term financing market.

    (SD-Agencies)