Foreign banks back plan to float sovereign bonds
Major foreign banks operating in Bangladesh have supported the government's initiative to launch sovereign bonds.
They said if the bonds are released now, the government will be able to keep their interest rates much lower -- within 4 percent to 6 percent.
The government is planning to float sovereign bonds worth $500 million to increase the availability of foreign currency in the country.
Four foreign banks, including Standard Chartered, Citibank NA and HSBC, have made their presentation to a government committee on floating the sovereign bonds.
The banks said the government may initially float bonds worth $500 million to $750 million in the international market.
If the tenure of the bonds is five years, the rate of their interest under the present market condition may be around 4.5 percent, and the rate may be 5.5 percent in case of 10-year tenure.
The committee on sovereign bonds was formed last month with Syed Manjurul Islam, additional secretary of the Finance Division, its chief.
The members of the committee include representatives from Bangladesh Bank, National Savings Directorate, Policy Research Institute, the finance ministry and the managing directors of Sonali Bank and Trust Bank.
The committee's responsibilities include studying the availability of credit in international market and recommending interest rates for the bonds.
The committee will submit its report to the government within next one to two weeks. After receiving the report, the government will take steps to launch the bonds.
In the recent times, the demand for foreign currency marked a rise as the foreign aid flow dropped and imports of fuel for quick rental power plant shot up.
As a result, the foreign currency reserve was under pressure and the exchange rate increased sharply against the taka, which ultimately fuelled inflation.
In this context, a BB official said the government has taken various strategies to ease pressure on the foreign exchange reserve. One of the strategies was to borrow money from international market by floating sovereign bonds.
Another plan was to allow the private sector to collect credit from foreign sources. In the last one month, a committee led by the central bank governor has approved more than $300 million foreign credit for the private sector companies.
Bangladesh Petroleum Corporation is taking an additional $500 million loan for fuel import from the Islamic Trade Finance Corporation.
The government has also requested some friendly countries, from which it imports fuel, to defer the payment date of import bills.
At the same time, the central bank has taken different steps to cut imports of luxury items to ease pressure on the foreign exchange reserve, and the measures have paid off, said the BB official.
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