IMF team in Dhaka to assist in developing local currency bond market
The discussions are aimed at exploring strategies and measures to establish a robust local currency bond market in Bangladesh
An International Monetary Fund (IMF) team arrived in Dhaka on Tuesday to engage in discussions regarding the development of a local currency bond market.
The five-member delegation will hold meetings with various government departments from today to 17 July, according to finance ministry and central bank sources.
The meetings will include discussions with senior officials of the Ministry of Finance, the Bangladesh Bank, the National Savings Directorate, and the Bangladesh Securities and Exchange Commission.
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The discussions are aimed at exploring strategies and measures to establish a robust local currency bond market in Bangladesh, analysts said. Establishing a local currency bond market has been long overdue as it would facilitate long-term financing and reduce dependence on short-term bank borrowing.
A well-developed bond market will also offer investors a wider range of investment options while allowing the government to finance infrastructure projects and other developmental initiatives, analysts said.
They believe that by leveraging the expertise and guidance of the IMF, the country can implement best practices and frameworks to develop an efficient and transparent bond market that meets international standards.
The delegation will gather information on LCBM, climate-related bonds, medium-term fiscal framework, domestic savings, contractual saving, social safety net and debt sustainability during their two-week visit.
Besides, they will take detailed information about debt and cash management.
On the last day of the mission visit, the senior government officials will present a summary of the bond market and also give their recommendations.
Faruq Ahmed Siddiqi, former chairman of Bangladesh Securities and Exchange Commission Farooq Ahmed Siddiqui told The Business Standard that there is a need to develop the bond market.
"But it was not possible to do that despite trying for a long time. One of the reasons is lack of investors," he added.
Masrur Reaz, chairman of Policy Exchange, told TBS the bond market is immensely needed for financing housing, infrastructure, technological manufacturing projects, logistics initiatives, and green projects.
"Otherwise, other unnecessary pressure is being created on the banks. Due to which liquidity management also becomes complicated at times," he added.
"Corporate bonds should be given an opportunity to develop the bond market, listings should be simplified, and the tax treatment should be favorable to both issuers and investors," he suggested.
He further suggested that insurance funds and newly formed public pension funds be allowed to invest in the bond market.
The IMF approved a loan of $4.7 billion for Bangladesh on 30 January this year. The international lender has disbursed $476.2 million for the first installment of this loan immediately after the approval. The entire loan will be repaid in seven installments over three and a half years till 2026.
A senior finance ministry official said the IMF usually reviews various aspects of loan terms before disbursing each tranche.
Accordingly, an IMF team will come next September to review the conditionality of the loan before releasing the second tranche.
The current IMF delegation has no involvement in the loan tranche review.
