Fresh move to issue sovereign bond
Experts doubt its viability, point at management incapacityShakhawat Hossain
The government has revived its plan to issue a sovereign bond for raising funds from the international money market less than 10 months into shelving a previous attempt in the face of informed criticisms.
A committee has already been formed to complete the initial process for issuance of the first-ever bond in the next fiscal year beginning from July 2013, said finance ministry officials.
Bangladesh Bank deputy governor Abu Hena Mohammed Raji Hasan is leading the committee tasked with completing the process in the next couple of months so that the government can raise at least US$ 500 million in the current fiscal year.
A number of bankers and economists once again expressed doubt about the government’s capacity to handle the move and its viability amid a range of unmitigated risk factors like high interests, currency devaluation, and inflation.
Referring to the ongoing debt crisis in Greece, Bangladesh Institute of Development Studies executive director MK Mujeri said the government should be more careful in assessing the risk factors of such a bond.
Greece had gone on a debt binge over the last decade that came crashing to an end in late 2009 provoking an economic crisis that has decimated the country’s economy, brought down its government, and unleashed social unrest.
Finance ministry officials, however, said the government revived the plan for taking loans from the international money market against the backdrop of a shrinking amount of soft loans handed out by multilateral lending agencies and a lower-than-expected foreign direct investment inflow.
It is apprehended that the government will face financial constraint in the final year of its tenure as the World Bank is unlikely to release the $1.2 billion credit it had initially promised for the Padma Multipurpose Bridge project but later suspended on allegation of a conspiracy of corruption in project implementation.
Besides, the government has failed to get released soft loans to the tune of $3 billion freezing in the pipeline because of donors’ stringent conditions.
A number of foreign banks operating in Bangladesh are already lobbying the government to become the lead manager for issuing the bond.
One of the main tasks of the FinMin committee is to select a capable bank out of the suitable applicants like StanChart, Citi Bank NA Bangladesh, and HSBC. It will also organise programmes and hold consultations with potential investors in the sovereign bond.
Asked for his comments on the bond issuance, committee chief Abu Hena told by New Age on Thursday that he was not in a position to talk on the issue, adding that he would talk on it soon after his return from a visit to Hong Kong.
Earlier in November, bankers and Board of Investment officials told a BoI seminar in the capital on issuance of sovereign bond that the government should not introduce a sovereign bond before considering the risk factors involved like a high interest rate, devaluation of currency, inflation, and lack of expertise and experience of managing sovereign bonds.
Anis Ur Rahman, a BB joint director now working at the BoI, said it would not be viable for the government borrowing money through introducing a sovereign bond at an interest rate higher than that the private sector gave to international financial institutes in borrowing funds.
Jamuna Bank Capital Management Ltd chief executive officer Mirza Ilias Uddin Ahmed said when the central bank was yet to demonstrate its capability to manage the local bond market, ‘the government should be careful in introducing any sovereign bond’.
Prime minister’s adviser Tawfiq-E-Elahi Chowdhury and Citibank NA officials, however, spoke in favour of issuing a sovereign bond. They said the risk factors could be overcome by establishing discipline in financial management.
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