Bangladesh Bank has taken initiatives to bring more money from the provident and pension funds into the government securities, said officials of the central bank.
A BB official told New Age on Thursday that the central bank had taken a project in April, 2012 titled ‘policy guideline for formation and operation of comprehensive pension and provident fund system’ to increase investment of such funds in the government securities.
The project will end later this month, he said.
The official said that the BB project would recommend expanding the investment of provident funds in the government securities.
The BB has already conducted a survey of the provident and pension funds in different government offices, autonomous organisations, corporate and private institutions.
The survey has found that total size of the provident funds in the private sector is worth Tk 31,500 crore, which is four per cent of the gross domestic products of the country, the official said.
Of the amount, only 15 per cent or Tk 4,650 crore have been invested in the government securities or in the treasury bills and treasury bonds, according to the BB data.
The BB project will recommend that the investment of provident funds in the treasury bonds increase to 25 per cent from the existing 15 per cent in the next five years, the official said.
In the second phase, the investment of the funds in T-bonds will increase to 40 per cent, he said.
The provident funds in the private sector have invested around 50 per cent of their money in fixed deposit receipts and the rest of the amount in the capital market, the BB data showed.
‘The best global practice is that the provident funds invest in T-bonds at least 40 per cent of their fund,’ the BB official said.
He said a number of countries had ensured up to 80 per cent investment of their provident funds in T-bonds.
Bangladesh is now far behind the global best practice in this connection, he said.
Another BB official said the central bank, after the end of the project, would also recommend that the finance ministry take measures to bring the provident and pension
funds of the government employees under the funded system.
He said, ‘Pension and provident funds of the government employees are now in unfunded condition. As a result, the government has to keep a significant amount of allocation in its budget for each financial year to provide provident and pension funds.’
‘The country’s provident funds in the private sector will be secured by increasing their investment in T-bonds,’ he said.
Besides, the country’s bond market will be more vibrant if the provident funds invest more in T-bonds, the official added.