Technical body formed to weigh up sovereign bond potential

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Nazmul Ahsan
The government has formed a high-powered Technical Committee (TC) to suggest possible gain and risk in issuing Sovereign bond to help solve problems about balance of payment (BoP).
The Finance Division under the Ministry of Finance (MoF) last week formed the committee, giving it one month's time.
Experts from both public and private sectors have been included in the committee; a maiden formal initiative from the government after Finance Minister AMA Muhith on November 3 last year said the government was considering a move for introduction of a sovereign bond to help ease pressure on foreign currency reserve.
The move to issue debt security came amid drying up situation of foreign aid in the country caused mainly by low disbursement of donor funds and abrupt backtrack of World Bank in financing Padma bridge.
Syed Monjurul Islam, additional secretary, Finance Division under the MoF has been made head of the technical committee. Other members of the committee are-Najmus Sakib, joint secretary, Finance Division, Md Ahsan Ullah, executive director, Bangladesh Bank, Dr Ahsan H. Mansur, Policy Research Institute, Md Humayun Kabir, managing director, Sonali Bank Ltd, Shah A. Sarwar, managing director, Trust Bank Ltd and Begum Mahmuda Akter Mina, director, Directorate of National Savings.
Generally, the government of a country having a somewhat unstable economy tends to denominate its bonds in the currency of another country having a more stable economy. The bond is issued by a national government of a country and denominated in a foreign currency that it chooses.
The Terms of Reference (ToR) of the TC said, committee members will evaluate possible risks of sovereign bond, examine possibilities in getting required loans through sovereign bond from international capital market and suggest the government about the methodologies of issuing the proposed bond.
Officials in the finance ministry said, they had completed discussion with foreign banks operating in the country on overall aspects of bonds. The formal approach of the government relating to issuance of the proposed bond has started now, they added.
''Now the government is feeling necessities in issuing the bond amid fragile state of foreign currency reserve," a top finance official told the FE on Friday.
"Detailed plan will be unveiled within a month," he hinted.
Experts said, sovereign bonds are issued in a relatively strong international currency and they can be sold to the other countries and foreign investors. It is very common that when a country needs that large amount of fund to support its spending programmes, it can borrow money from other countries by issuing sovereign bonds.
In November, last year, a policy paper of MoF said country's macro-economic management might face a daunting challenge, with fiscal risks getting tougher to address, if the government issues sovereign bond to address its crisis in balance of payment situation.