Govt lifts investment cap on dollar bonds
The government has removed the upper ceiling on investments in two US dollar related bonds so that non-resident Bangladeshis (NRBs) can invest as much as they want in both securities, according to a notification from the Internal Resources Division (IRD).
However, the rate of interest has been reduced depending on the slab of investment, as per the notification which comes at a time when Sri Lanka is grappling with depleting foreign currency reserves.
Earlier, NRBs could invest up to the equivalent of Tk 1 crore in US dollars in the US Dollar Premium Bond, US Dollar Investment Bond and Wage Earners Development Bond, an IRD official said.
"But from now on, there will be no maximum ceiling on investments in the US Dollar Premium Bond and US Dollar Investment Bond," he added.
The IRD official went on to say that they withdrew the cap as NRBs have been demanding as much for a long time.
"Besides, higher investment will increase our foreign exchange reserves," he said.
Both bonds mature in three years.
In case of the US Dollar Premium Bond, the interest rate on investments of up to $100,000 will be 5.5 per cent at maturity in the third year.
Meanwhile, the interest rate at maturity for investments of between $100,001 and $500,000 will be 4.6 per cent while investments above $500,001 will get 3.5 per cent.
Investors would previously get 7.5 per cent interest regardless of the investment slab after the three-year period. In case of the US Dollar Investment Bond, investors used to get 6.5 per cent interest upon maturity.
Now, investors will get 5 per cent interest for investments of $100,000 after maturity while the rate for investments of between $100,001 and $500,000 will be 4 per cent.
When it comes to investments higher than $500,001, investors will get 3 per cent interest, according to the notification.
The government introduced the two bonds in 2002 to attract NRB investment in Bangladesh.
Bangladeshi diaspora can buy the bonds through their foreign currency accounts at banks or through cheques or draft. They can apply for buying bonds through branches of Bangladeshi banks abroad.
Selim Raihan, executive director of the South Asian Network on Economic Modeling, suggested being cautious in the issuance of bonds to be paid back in foreign currency.
Sri Lanka faced a problem in repaying debts because of a build-up of repayment pressure, he said.
"There is uncertainty in the global economy. At this moment, the government could maintain the investment ceiling as increased debt through bonds will fuel repayment costs."
"As bonds are issued, the funds generated should be used properly so than adequate returns are generated to repay the debt," he added.
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