BM Desk : To bring stability to the stock market, the government is considering providing BDT 1,000 crore (10 billion taka) to the state-owned investment institution, the Investment Corporation of Bangladesh (ICB), through the revised national budget.

Senior officials of the Ministry of Finance recently held a meeting to discuss the matter. Reliable sources have said that the fund may be disbursed once the finance advisor and other top officials return from an official visit to Washington.

ICB, the only state-owned investment bank, raises and restructures funds through various means such as fixed deposit receipts (FDRs), bonds, and shares. After the caretaker government came to power in the last fiscal year, ICB requested financial assistance from the Financial Institutions Division (FID), which forwarded the request to the Ministry of Finance and Bangladesh Bank.

Last month, the FID wrote to the Ministry of Finance requesting BDT 13,000 crore (130 billion taka) for ICB at low interest for a period of 10 years, including a two-year grace period. Their justification was that ICB plays a vital role in ensuring stock market stability, but it is currently suffering from a liquidity crisis.

Since 2010, ICB has raised about BDT 13,000 crore through FDRs and bond issuance. By September, the repayment deadlines had already passed for BDT 6,000 crore in principal and interest, and the amount is steadily increasing. Additionally, ICB is required to pay BDT 90 crore in interest every month.

Despite this situation, under government instruction, ICB had to spend BDT 80 crore to purchase 6.6 million shares of National Tea Company. The FID’s letter stated, “This has further deepened ICB’s liquidity crisis.”

In response, the central bank declined to provide the funds. Their reasoning was that it would fuel further inflation, which is already at a high level. In a letter to the FID, Bangladesh Bank stated, “Providing such funds could create uncertainty in securing budgetary support from international development partners.”

They further added that such funding contradicts contractionary monetary policy and that the long repayment tenure violates the Bangladesh Bank Order of 1972.

Instead, Bangladesh Bank advised that the fund be provided through the revised national budget, which would have a relatively lower impact on inflation.

ICB has requested the funds to be made available as soon as possible, as the stock market is currently on a downward trend and share prices are low. The main index of the Dhaka Stock Exchange has dropped nearly 10 percent, or 512 points, over the last 30 days.

Regarding this, ICB officials said, “If ICB receives the funds now and can invest in this low-priced market, it will be able to generate quick profits from those investments.”

Previously, in 2024, the government had provided BDT 3,000 crore to ICB through a sovereign guarantee. Of that, BDT 2,000 crore was used to repay loans. The remaining funds were invested in the stock market, and ICB officials claimed that they earned a capital gain of around 20% from those investments.