The International Finance Corporation (IFC) has formally requested the Bangladesh Government to grant final approval for the issuance of Bangladesh Taka (BDT)-denominated bonds aimed at financing local industrial and business ventures. The request was made by Martin Holtmann, the IFC’s country manager for Bangladesh, in a letter to the Economic Relations Division (ERD) earlier this month.
The IFC, which is the private-sector financing arm of the World Bank Group, initiated discussions about launching these debt securities four years ago. After a series of meetings, the organization submitted its initial request for Government consent in July 2021. In recent developments, the ERD has reached out to the Ministry of Finance (MoF) for a final opinion on the issuance of these onshore bonds.
A senior official from the MoF indicated that internal discussions are ongoing regarding the approval of these taka-denominated debt securities, which are expected to be sold on the domestic debt market in Bangladesh. The issuance of these bonds is anticipated to provide essential financial support to local industries, particularly the RMG sector, which has been a significant contributor to Bangladesh’s economy.
The proposed bonds will enable the IFC to mobilise funds and invest in local firms, addressing the substantial demand for financing among Bangladeshi private-sector entities looking to expand their operations and establish new ventures. This is particularly vital for the RMG industry, which relies heavily on capital for growth and competitiveness in the global market.
In 2019, the IFC successfully issued BDT-denominated ‘Bangla Bond’ worth Taka 800 million (approximately US $ 9.5 million) on the London Stock Exchange, aimed at enhancing its operational capacity in Bangladesh. The Government is eager to invigorate the bond market to drive long-term investment away from traditional banking channels, which have been burdened by high default rates on loans to various businesses, including the RMG sector.
Currently, long-term industrial investments are primarily financed through banks, creating significant pressure on the banking sector. As a result, the financial health of these institutions can weaken if a number of large borrowers default. The introduction of taka-denominated bonds by the IFC could provide a much-needed alternative for financing in the RMG sector and other industries, fostering growth and stability in Bangladesh’s economy.
