Sovereign bonds left for next govt

The government's plan to issue sovereign bonds this June has been pushed back to the next government due to uncertainty over the foreign currency requirement for the Padma Bridge project.
The country plans its first international bond sale once a new government is elected this year or in early 2014, Bangladesh Bank Governor Atiur Rahman told Bloomberg News yesterday.
“Preparatory work for a debut international issue of hard currency has progressed well. The bond will provide a benchmark facilitating bond issuance abroad by corporates,” Rahman said at a presentation to investors in London on Friday.
The Sovereign Bond Transaction Execution Committee, a government panel set up to recommend steps before the bond is issued, said the government could raise $500 million in the offering to help finance infrastructure development.
In an interim report, the nine-member panel also said the government had completed consultation with three banks on bonds' international market situation, possible yields and transaction process.
The committee also warned the government about the timing of the bond issuance, as the issuance might overshoot the country's ceiling set by the International Monetary Fund for borrowing from external sources on hard terms.
Bangladesh is allowed to borrow $4.25 billion by December 2013 under the IMF's external credit facility.
If the government goes ahead with its sovereign bond issuance plan then it might need to trade off with its borrowing plans for power projects, the committee said.
A finance ministry official upon conditions of anonymity said there is also uncertainty over whether the government would be able to start construction of the Padma Bridge at all.
“Even if the project starts there will be uncertainty over the amount of foreign currency to be needed for the country's largest ever infrastructure project in the first six months of the next fiscal year,” said the official.
Communications Minister Obaidul Quader has already said the tender for the project would be opened by this month for the construction of the main bridge.
The government has allocated Tk 6,852 crore for the bridge project in fiscal 2013-14. Of the amount, foreign currency accounts for $591, which is 70 percent of the allocation.
The finance ministry official said the government would use its reserves of foreign currency if it has to make any payment for the project.
Foreign currency reserves stood at $15.27 billion last week, according to central bank.
A government source said the present government also has a plan to approach the development partners again for the finance of the project if it can retain power in the national elections due early next year.
The government has already informed the IMF about the plan, which was also indicated in a report of the IMF released early this month, said the source.
The report said the scope of the project, the oversight framework (for which the authorities want to engage the Asian Development Bank) and the overall financing package, are still under consideration by the authorities as the government discusses options with different development partners.
Part of the financing of the $3.05 billion project is expected to come from already committed external sources -- $200 million from India and $140 million from Islamic Development Bank, according to the IMF report.