Govt plans buyback of its securities

The government plans to buy back its securities for a better cash management, limiting interest payments from annual budget, officials said.
As part of the move on prudent financial management, a tripartite meeting among senior officials of both the ministry of finance and the Bangladesh Bank (BB) and treasury heads of all the primary dealer (PD) banks was held at the central bank headquarters in Dhaka on Sunday afternoon.
The ministry of finance has made the latest move against the backdrop of a surplus in balance of government account that stands at around Tk 15 billion.
At the meeting, the PD banks proposed that the government should conduct the buyback as and when required.
The treasury head of PD banks also requested the authorities concerned to consider maturity of bonds and treasury bills (T-bills) maintaining the commitment to minimum timeline.
The ministry officials disclosed at the meeting that the government could issue another type of bond named 'callable bond' in future to bring variety of bonds.
They also said the government will introduce 14-day T-bills shortly to handle short-term cash management properly.    
The buyback issue is expected to be finalised at the next CDMC (Cash and Debt Management Committee) meeting scheduled to be held by the end of October, a BB senior official told the FE after the meeting was over.
He also said the government is planning to buy back its securities for better cash management.
The government bought back its securities worth Tk 11.16 billion in the fiscal year (FY) 2007-08 and FY 2009-10, according to the official.
"The yields on the buyback securities will be fixed in line with the market rates," the central banker said while replying to a query.
Talking to the FE, Ashim Kumar Saha, Senior Executive Vice President and Head of Treasury of Mercantile Bank Ltd, said such arrangement would help the government cut expenses on interest payments against such securities and also contribute to  boosting the secondary market in Bangladesh.
"We've also urged the authorities concerned that minimum 30 per cent of life funds of life-insurance companies may be invested in government securities instead of existing regulation of maximum 30 per cent," Mr. Saha noted.
The senior treasury official also said a national central pool for all kinds of funds, like pension fund, provident fund and superannuation fund, may be established and necessary rules and regulations formulated for investing the funds in government securities.   
Currently, three T-bills are being transacted through auctions to adjust government borrowings from the banking system. The T-bills have 91-day, 182-day and 364-day maturity periods.
Furthermore, five government bonds with tenures of two, five, 10, 15 and 20 years respectively are traded on the money market. The central bank of Bangladesh earlier had selected 20 PD banks to deal in government securities on the secondary market.
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