Public Debt Act updated with sovereign bonds, government sukuk clauses

The government published the gazette for Public Debt Act, 2022 on Tuesday.

The new act, replacing Public Debt Act 1944, incorporates clauses for sovereign bonds and Shariah-compliant securities.

In the absence of necessary clauses in the previous act, the government had to rely on executive orders for its borrowings.

For example, the government collected Tk8,000 crore for a countrywide safe water project with a sukuk in fiscal year 2020-21, based on executive orders. But from now on, it can rely on the added clauses in the new act.

The new act incorporates clauses related to the state's guarantee against debts issued by its various entities.

National savings certificates will also be governed by the act.

A clause for a depository of the government securities has been included in the act, while the government will decide whether to create a separate depository or use the existing Central Depository Bangladesh Ltd (CDBL).

A clause for the creation of special purpose vehicles (SPV) for financing projects through asset-backed securities has also been included.

Bangladesh Securities and Exchange Commission Chairman Professor Shibli Rubayat-Ul-Islam said, "Government securities are a benchmark for the bond market and we thank the government for the timely act that would help develop a vibrant bond market in the country."

Capital market experts say the act will raise confidence of both local and foreign investors, and the government will gain a better response from them when it moves to issue sovereign bonds or sukuks.

Exchange trading of government securities is crucial for the development of a vibrant market for debt securities, they added.