Two camps at seminar spar over sovereign bond issue
Thursday, 22 November 2012
FE Report
A few speakers at a seminar Wednesday favoured issuance of sovereign bonds, while some others opposed it as it accompany a number of risks.
The speakers in favour of the bond said it was required for the presence in the global financial market and it would help increase the investment flow to the private sector and also help attract foreign direct investment (FDI).
The observation came at the seminar on 'issuance of sovereign bond' held at the conference room of the Board of Investment (BoI). Citibank N.A. prepared the keynote paper on the issue. The term 'sovereign bond' refers to a debt instrument, that is issued by a country and that bears interest. As with all bonds, a sovereign bond generally promises to pay a certain amount on a certain date.
Prime Minister's Adviser on Energy Affairs Dr Tawfiq-e-Elahi joined the programme as chief guest.
BoI executive member Nabhash Chandra Mandal moderated the programme.
Speaking at the seminar, Dr Tawfiq-e-Elahi said it (sovereign bond) helps attract FDI.
He said the country needed 5 to 6 billion US dollars to keep pace with its annual growth rate of 7-8 per cent.
"I believe this is an alternative source and it will ensure our presence in the global financial market," he added.
On the presumed risks associated with a bond, he said: "Fortune favours the brave."
Mr Elahi said introduction of the sovereign bond worth US$ 500 million was not a big deal as many developing nations were issuing such bonds involving big amounts.
He said 'credit history' was very important for an individual and a country to avail of the credit facility in the world.
Md Anis Ur Rahman, a joint director of Bangladesh Bank presently posted to the BoI, said the rate of interest on sovereign bonds was much higher than that of overseas loans.
Mirza Elias Uddin Ahmed, senior executive vice president and head of treasury division of Jamuna Bank, said entry into any debt is easy but exit is very tough.
Mr Ahmed said Bangladesh was now maintaining comparatively good rating adding: "Would we be able to maintain this rating in future?"
Jahangir Javed, head of treasury of Mercantile Bank, said Bangladesh failed to develop a domestic bond market adding: "We require strong marketing approach to popularise our international bond market."
Replying to these observations, Khd. Rashed Maqsood, Citi County Officer and managing director said issuance of bonds is not needed to run any country. "It is conducive to FDI and private sector expansion," he added.
He said that loans and bonds are not the same instruments adding: "Bangladesh needs a good track record of credit."
He said a good track record of borrowing helps avail big loans.
He said: "We need to create a base of our country."
Replying to a question relating to exchange rate fluctuations, the Citibank country chief said: "We'll not choose such types of companies, which are fully dependent on the local currency."
He said it is simply a new avenue for alternative sourcing.
Two Citibank NA officials-Director and Head of Markets Sajed-ul Islam and associate of capital markets origination Kelvine Chong-jointly presented the keynote paper at the seminar.
While presenting the paper, Mr Islam said Bangladesh's status in terms of key indicators was quite okay excepting a higher level of inflation.
Mr Islam said the country was now in the positive territory of current account balance.
He said Bangladesh has primarily relied on domestic credit for its economy with domestic banks supporting growth.
"This (domestic credit) could create risks for the banking system going forward."
Mr Islam said Bangladesh should consider accessing the US debt capital markets.
He said Bangladesh's available foreign resources are sufficient to allow it to make all external short-term debt payments.
He said Bangladesh's liquidity risk is lower than its Asian peers. The Asian median is 96 per cent while Bangladesh has the median of 67 per cent in liquidity risk.
Mr Islam said Bangladesh had higher domestic credit growth among its Asian peers.
"Interest payments in Bangladesh are higher than its Asian peers. Bangladesh has 16 per cent rate of interest while Asian median is 8.0 per cent."
In his concluding remarks, Nabhash Chandra Mandol said many countries including North Korea and Russia failed to utilise the sovereign bonds due to their management problems.
He said: "We must proceed by effectively evaluating the experiences of other nations."
He said Bangladesh could succeed if it moved forward by judging from its weaknesses and strength.
A few speakers at a seminar Wednesday favoured issuance of sovereign bonds, while some others opposed it as it accompany a number of risks.
The speakers in favour of the bond said it was required for the presence in the global financial market and it would help increase the investment flow to the private sector and also help attract foreign direct investment (FDI).
The observation came at the seminar on 'issuance of sovereign bond' held at the conference room of the Board of Investment (BoI). Citibank N.A. prepared the keynote paper on the issue. The term 'sovereign bond' refers to a debt instrument, that is issued by a country and that bears interest. As with all bonds, a sovereign bond generally promises to pay a certain amount on a certain date.
Prime Minister's Adviser on Energy Affairs Dr Tawfiq-e-Elahi joined the programme as chief guest.
BoI executive member Nabhash Chandra Mandal moderated the programme.
Speaking at the seminar, Dr Tawfiq-e-Elahi said it (sovereign bond) helps attract FDI.
He said the country needed 5 to 6 billion US dollars to keep pace with its annual growth rate of 7-8 per cent.
"I believe this is an alternative source and it will ensure our presence in the global financial market," he added.
On the presumed risks associated with a bond, he said: "Fortune favours the brave."
Mr Elahi said introduction of the sovereign bond worth US$ 500 million was not a big deal as many developing nations were issuing such bonds involving big amounts.
He said 'credit history' was very important for an individual and a country to avail of the credit facility in the world.
Md Anis Ur Rahman, a joint director of Bangladesh Bank presently posted to the BoI, said the rate of interest on sovereign bonds was much higher than that of overseas loans.
Mirza Elias Uddin Ahmed, senior executive vice president and head of treasury division of Jamuna Bank, said entry into any debt is easy but exit is very tough.
Mr Ahmed said Bangladesh was now maintaining comparatively good rating adding: "Would we be able to maintain this rating in future?"
Jahangir Javed, head of treasury of Mercantile Bank, said Bangladesh failed to develop a domestic bond market adding: "We require strong marketing approach to popularise our international bond market."
Replying to these observations, Khd. Rashed Maqsood, Citi County Officer and managing director said issuance of bonds is not needed to run any country. "It is conducive to FDI and private sector expansion," he added.
He said that loans and bonds are not the same instruments adding: "Bangladesh needs a good track record of credit."
He said a good track record of borrowing helps avail big loans.
He said: "We need to create a base of our country."
Replying to a question relating to exchange rate fluctuations, the Citibank country chief said: "We'll not choose such types of companies, which are fully dependent on the local currency."
He said it is simply a new avenue for alternative sourcing.
Two Citibank NA officials-Director and Head of Markets Sajed-ul Islam and associate of capital markets origination Kelvine Chong-jointly presented the keynote paper at the seminar.
While presenting the paper, Mr Islam said Bangladesh's status in terms of key indicators was quite okay excepting a higher level of inflation.
Mr Islam said the country was now in the positive territory of current account balance.
He said Bangladesh has primarily relied on domestic credit for its economy with domestic banks supporting growth.
"This (domestic credit) could create risks for the banking system going forward."
Mr Islam said Bangladesh should consider accessing the US debt capital markets.
He said Bangladesh's available foreign resources are sufficient to allow it to make all external short-term debt payments.
He said Bangladesh's liquidity risk is lower than its Asian peers. The Asian median is 96 per cent while Bangladesh has the median of 67 per cent in liquidity risk.
Mr Islam said Bangladesh had higher domestic credit growth among its Asian peers.
"Interest payments in Bangladesh are higher than its Asian peers. Bangladesh has 16 per cent rate of interest while Asian median is 8.0 per cent."
In his concluding remarks, Nabhash Chandra Mandol said many countries including North Korea and Russia failed to utilise the sovereign bonds due to their management problems.
He said: "We must proceed by effectively evaluating the experiences of other nations."
He said Bangladesh could succeed if it moved forward by judging from its weaknesses and strength.