Bangladesh is preparing to issue its first sovereign dollar bond in international capital markets, with the government targeting between $500 million and $1 billion to diversify its sources of financing.
The final size and terms of the proposed bond have yet to be determined. The government expects to issue the bond by December, subject to final approval from the Alternative Financing Committee led by Finance Minister Amir Khosru Mahmud Chowdhury.
Several meetings have already been held since the committee was formed, while preparations of the necessary documents are underway.
Tanvir Shahria Gani, special assistant to the prime minister for investment and the capital market, told The Business Standard that Bangladesh is planning to issue a dollar-denominated bond in overseas markets and has received positive responses from investors. He said the bond could be issued within the next two to three months.
The Ministry of Finance formed an eight-member high-level committee in July to assess the feasibility of issuing sovereign bonds in international markets and recommend alternative financing sources.
The committee is tasked with making recommendations on the bond’s size, currency, target market, maturity, interest structure, timing and other financial and technical aspects. It is also reviewing Bangladesh’s eligibility for inclusion in JPMorgan’s Emerging Market Bond Index (EMBI), which tracks international bonds issued by governments and companies in emerging markets.
According to the report, eligible debt instruments for the index must have an outstanding face value of more than $500 million.
Bangladesh has not previously raised capital by issuing a sovereign bond in international markets. The government has instead relied largely on loans from development partners for budget support and development projects.
Alongside the dollar bond, the government is also considering other forms of international financing, including sukuk, panda bonds, samurai bonds, infrastructure bonds and diaspora bonds.
Gani said successfully issuing a dollar bond could pave the way for Bangladesh to raise funds in other currencies and send a positive signal to international investors.
The government is also exploring the possibility of issuing panda bonds in China’s market. Ahead of Prime Minister Tarique Rahman’s visit to China in June, the Chinese government proposed that Bangladesh issue panda bonds. A Chinese delegation subsequently held meetings with officials of Bangladesh Bank, the Economic Relations Division and the Ministry of Finance.
A joint statement issued by the two countries later expressed support for advancing the initiative.
At a meeting of the Alternative Financing Committee earlier this month, chaired by Finance Minister Amir Khosru Mahmud Chowdhury, officials also discussed issuing sovereign bonds in foreign currencies, including panda bonds. Bangladesh Bank Governor Mostaqur Rahman initially supported a proposal to issue a $50 million panda bond.
However, ERD Secretary Md Shahriar Kader Siddiqui raised concerns that the International Monetary Fund could potentially object to such an issuance.
The government will determine the final size, terms and timing of the proposed dollar bond after receiving the committee’s approval. If issued by December as planned, it would become Bangladesh’s first sovereign dollar bond in international capital markets.
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