Govt eyes first sovereign dollar bond by Dec, targets $500m-$1b

Infograph: TBS

Bangladesh is preparing to issue its first sovereign dollar bond in international capital markets, targeting between $500 million and $1 billion as the government seeks to diversify its funding sources. 

The upcoming issuance will mark the country's debut attempt to raise capital through foreign-currency sovereign debt on the global stage.

The government expects to issue the bond by December this year, subject to final approval of the size and terms of the issuance from the government's Alternative Financing Committee, headed by Finance Minister Amir Khosru Mahmud Chowdhury.

"We have planned to issue a dollar bond in foreign capital markets, and we are receiving good response from investors. The bond will likely be issued within the next two to three months," said Tanvir Shahriar Ghani, special assistant to the prime minister for investment and capital market affairs, while speaking to The Business Standard recently.

Tanvir also heads a high-powered committee formed by the finance ministry in July to examine sovereign bond issuance in international markets and recommend ways to secure alternative sources of financing.

The committee has held several meetings since its formation and decided to move ahead with a dollar-denominated bond. The government is currently considering an issue of $500 million to $1 billion, although the final amount has yet to be decided.

The committee also reviewed eligibility requirements for inclusion in the Emerging Markets Bond Index (EMBI), a benchmark created by JP Morgan to track the performance of international government and corporate bonds issued by developing countries. It noted that eligible debt must have an outstanding face value of more than $500 million.

Alongside dollar debt, authorities are also weighing alternative foreign-currency structures, including Panda, Samurai, Dim Sum, and Sukuk bonds. Discussions on issuing Panda Bonds had begun even before the committee on bond issuance was formed. There have also been extensive discussions on Sukuk bonds.

Noting that Bangladesh needs to move towards alternative sources of financing, Tanvir said issuing sovereign bonds would provide an additional avenue for raising funds.

"If we raise capital by issuing a dollar bond, it will make it easier to issue bonds in other currencies. It will send a positive message to international investors, making it easier to raise capital through other bonds," he said, explaining the importance of starting with a dollar bond.

"We have already held several meetings with foreign investors regarding the bond issuance, and they are interested in investing in the bond," he added.

He further said the government plans to explore Sukuk, Samurai, infrastructure and diaspora bonds after launching the dollar bond.

Push for alternative financing

The eight-member committee of the finance ministry is assessing the feasibility of issuing sovereign bonds in different foreign currencies and international markets. 

It has been tasked with recommending the size of future bond issues, currencies and markets, as well as maturities, interest-rate structures, timing and other financial and technical aspects.

The bonds will require approval from the government's Alternative Financing Committee, which is tasked with identifying alternative sources of government financing and assessing opportunities to raise funds from international markets.

Tanvir said work on the bond issuance had been under way since the ministry's committee was formed, with the necessary documents being prepared.

"The World Bank and the IMF were created primarily to support very poor countries. For a country like ours that is at the growth stage, we need to expand our financing options significantly," he said. 

"We have to go to the private market. There are many forms of financing – Samurai bonds, hedge funds, private equity, Panda bonds, sovereign bonds. There are so many options."

Panda bond proposal

Ahead of Prime Minister Tarique Rahman's visit to China in June, the Chinese government proposed that Bangladesh issue Panda Bonds. A Chinese delegation visited Dhaka before the trip and met officials from Bangladesh Bank, the Economic Relations Division and the finance ministry to discuss the proposal.

A joint statement issued during the prime minister's visit said Bangladesh and China had agreed to pursue the introduction of Panda Bonds.

Earlier this month, the government's Alternative Financing Committee, chaired by Finance Minister Amir Khosru Mahmud Chowdhury, discussed issuing sovereign bonds in foreign currencies, including Panda Bonds.

At the meeting, Bangladesh Bank Governor Mostaqur Rahman expressed initial support for issuing a $50 million Panda Bond. ERD Secretary Md Shahriar Kader Siddiky, however, said that although China was willing to support a potential Panda Bond issuance, the International Monetary Fund might raise objections.

The meeting later decided to form a committee to examine the issuance of sovereign bonds in foreign currencies, including Panda Bonds.