Several academics argued in favour of the proposal since they felt that it may be more economical for the government to raise funds abroad. However, such borrowings may entail foreign currency exposure and hence the foreign currency risk, which was not built into the analysis of benefits.
Another line of argument that was put forward in favour of foreign currency sovereign borrowings was that the government’s borrowing abroad would help develop a benchmark for the private sector foreign currency debt. However, now weightage for sovereign risk is assigned to a private sector debt even without the sovereign benchmark, after taking into account the sovereign risks.