Bangladesh is firming up plans to issue its first sovereign bond denominated in dollars, but looming elections may prevent it from achieving the goal this year, reports Reuters.
\nIn an exclusive interview with IFR, Bangladesh Bank governor Atiur Rahman said: \u2018A lot of technical work is going on and we will be launching this bond at a very opportune moment, but we are quite far, I would say.\u2019
\nBangladesh is expected to elect a new parliament within 90 days of the expiration of the term of incumbent lawmakers on December 29. The political uncertainty ahead of the polls may make a bond offering this year impractical.
\nHowever, as the country seeks to boost infrastructure investment, it will need to raise foreign debt, Atiur said.
\nIFR first reported on a potential US dollar sovereign from Bangladesh in March.
\nAtiur said, \u2018Apart from the technical work and the hurdles next year\u2019s general elections pose, Bangladesh is confident that it will be successful when it finally hits the market.\u2019
\n\u2018There is a lot of money in developed countries at a very low cost and investors are looking at new markets,\u2019 he said. \u2018The new markets also need these funds for infrastructure and they offer a high-yielding investment.\u2019
\nIn addition, rating agencies have kept Bangladesh\u2019s credit status unchanged for a while, something that has reassured global investors.
\n\u2018I think the government of Bangladesh has rightly decided to go for a funding like that, but the timing is also important \u2014 it has been fuelled by the consistent four-time stable outlook from Moody\u2019s,\u2019 Atiur said.
\n\u2018Also, S&P and Moody\u2019s have given us stable outlooks, despite all the problems we are having in politics. They are giving us a lot of good weight in the way forward, in terms of achieving higher levels of consistent growth. So, that gives us an extra confidence in going for a bond,\u2019 he added.
\nS&P rates Bangladesh BB-, and Moody\u2019s has holds it at Ba3, both with stable outlooks.
\nWhile Bangladesh wants to take advantage of the appetite for risk to lock in cheap funding, Atiur said that bond proceeds
\nshould be earmarked
\nfor infrastructure development to ensure they generate revenue to repay investors.
\n\u2018The money has to be invested immediately, otherwise your debt service will be fuelling deficits,\u2019 Atiur said. \u2018That\u2019s why this money has to be raised when the project is laid down, so you just invest in it and get the results. Unless you have that situation, I would not advise the government to borrow money to keep it in reserve. That\u2019s not the best idea.\u2019
\nThere is no shortage of investment opportunities demanding foreign money. \u2018We have some infrastructure projects in the pipeline – we have bridges, four-lane roads … we also want to go for a deep sea port,\u2019 he said. \u2018It has to be focussed. You cannot get this money for your budget support.\u2019
\nIn fact, he said that the government should not rely on foreign debt alone, even for infrastructure investment.
\n\u2018Part of it will be funded with bonds, the other part will be loans or our own resources,\u2019 he said. \u2018Our reserves have been growing at a very phenomenal rate. In the last four years, since this government
\ncame in, investment has literally tripled. It was $5bn-$6bn. Now, it is a $15bn reserve.\u2019
\nThe government had also been developing the local markets as a way to increase its funding and create a new avenue for financing for local companies, Atiur said.
\n\u2018We are working closely with the ministry of finance in developing new products and also the old ones,\u2019 he said. \u2018We are encouraging the government to go for local bonds in terms of raising funds, instead of always depending on banks. However, this takes time, and capacity-building is a major constraint.\u2019
\nHe also revealed that the central government was testing new formats. \u2018Last month, we introduced two-year bonds,\u2019 he said, noting that the government already issued five- and 10-year bonds locally, but that there was bottled demand for shorter-term paper.
\nThe government has also taken a key step to allow foreign investment in the local bond market with the removal of one-year lock-ins for non-Bangladeshi accounts.
\n\u2018If you buy today, you can sell tomorrow. That has helped us and we are also working with secondary market development,\u2019 Atiur said. \u2018We now have a secondary market platform for our local bonds. So, anyone sitting anywhere in the world can have access to (Bangladesh\u2019s local) bonds.\u2019
\nThat has already spurred Western interest. \u2018One of the very famous US firms bought our five-year treasuries recently \u2014 almost $2m,\u2019 he said. \u2018That gives a lot of confidence.\u2019 If they are already buying the local bonds, it seems demand for foreign bonds should not be a problem.<\/p>\n

-With New Age<\/span> input<\/p>\n","protected":false},"excerpt":{"rendered":"

Bangladesh is firming up plans to issue its first sovereign bond denominated in dollars, but looming elections may prevent it from achieving the goal this year, reports Reuters. In an exclusive interview with IFR, Bangladesh Bank governor Atiur Rahman said: \u2018A lot of technical work is going on and we will be launching this bond<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_editorskit_title_hidden":false,"_editorskit_reading_time":0,"_editorskit_is_block_options_detached":false,"_editorskit_block_options_position":"{}","footnotes":""},"categories":[4],"tags":[1986],"yoast_head":"\n