The government on Wednesday said it was planning to prepay over $2.9 billion costly foreign loans this fiscal, which would be funded through domestic market borrowing.

"We are planning to prepay $1.4 billion multilateral loans and another $1.5 billion bilateral loans this fiscal," Budget Secretary D Swarup said at the weekly review meeting.

He said the government was talking to multi-lateral agencies like World Bank and Asian Development Bank to identify the high-cost for early repayment.

"If we identify high cost debt worth over $1.4 billion multilateral loans, we may repay more this fiscal," he said, adding that the total prepayment would be more than $2.9 billion.

The government would raise resources from the domestic market to prepay the foreign loans, Swarup said, adding that there would not be any impact on the Centre's financial position.

Last fiscal, government prepaid high cost loans worth about $3 billion taken from World Bank and Asian Development Bank.

The Centre is also planning to swap high-cost debts of states worth Rs 18,000 crore (Rs 180 billion) this fiscal.

Swarup said the total debt swap would be Rs 32,000 crore (Rs 320 billion), of which Rs 18,000 crore would be for state loans and another Rs 14,000 crore (Rs 140 billion) for small savings.

Small savings collection surged by 27 per cent to Rs 43,666 crore (Rs 436.66 billion) till August this fiscal compared to Rs 34,462 crore (Rs 344.62 billion) during the first five months last fiscal.