DSE crosses 7,400-point mark
The government is planning to invest the employees’ provident fund in the local bond markets to increase the balance of the funds, officials of the finance ministry have said.
They said the balance of the provident fund declined to around Tk 260 crore at the beginning of the current financial year from Tk 2,060 crore in the last fiscal year due to sharp increase in the rate of withdrawal from the provident fund in recent times.
A reason for the increase in the rate of withdrawal from the provident funds may be that people are investing in the booming capital market. We are planning to invest the provident funds in the bond market so that investors get good return as the interest rate of bonds is much higher than bank interest rates,’ said an official of the finance ministry adding that the fund was lying idle in the bank.
A primary decision to invest the provident funds in bond markets was taken at a meeting of the cash and debt management committee, headed by a joint secretary of the ministry, last month.
The finance ministry would work out strategies for making the funds conducive for investment, the meeting decided.
The ministry would submit a report to the next CDMC meeting, said an official.
He said there were some restrictions in investing the provident fund and Bangladesh Bank would appoint an actuary, who would recommend how the government could overcome the restrictions.
The CDMC meeting also sought Bangladesh Bank’s advice in this regard.
Officials said that they were encouraged by the Indian government’s move to invest provident fund in the local share and bond markets this year. ‘Besides, the Chile government invested the fund in the local share and bond market earlier, building up the fund equivalent to 68 per cent of the country’s GDP,’ said another official.
A World Bank report said Bangladesh’s bond market represented the smallest in South Asia, accounting for only 12 per cent of the country’s GDP.
With $7.35 billion, the size of the country’s bond market is far smaller than the banking assets, estimated at nearly $32 billion, equivalent to more than 50 per cent of the GDP, the bank’s report on ‘South Asian domestic debt market’ said.
Sri Lanka has the largest bond market in the region based on the value of outstanding bonds as percentage of GDP, followed by India, Pakistan, Nepal and Bangladesh.
India’s bonds amounted to 35 per cent of GDP while Nepal’s domestic bonds were 15 per cent.
