Govt approves IFC bond for industrial development

The government has approved the International Finance Corporation (IFC) to introduce local currency bonds to raise funds for extending financial support to various domestic industries and agencies in need of money.

The Economic Relations Division (ERD) sent a consent memo last week over issuance of Bangladesh Taka denominated bonds to the acting country manager of IFC for Bangladesh, Bhutan and Nepal Nuzhat Anwar.

The memo was signed by senior assistant secretary to ERD, Md Sarwar Morshed.

The IFC had solicited Bangladesh government’s authorisation to issue the onshore Taka denominated bonds saleable at the local capital markets, on July 8.

An official of ERD said the proposed bond is to be traded on Dhaka Stock Exchange floor and proceeds would mean funding local industries and enterprises.

The official said the face value of the bond and the size of the fund are yet to be worked out but demand for investment will determine the size of the endowment.

The letter said the government in principle agrees to allow IFC to issue the onshore Bangladesh Taka-denominated bond in the domestic capital market subject to compliance with the relevant laws, rules and regulations.

The IFC, the World Bank Group's private sector lending arm, has to issue a part of the bond through Initial Public Offering (IPO), officials said.

The issuance of bonds will be treated as a business operation and that the IFC has to pay the customary tax and other levies as paid by other financial institutions.

The organisation will not be allowed lending offshore and currency swap will remain prohibited.

The IFC, for the first time on November 11 , 2019, had issued BDT-denominated 'Bangla Bond' on the London Stock Exchange worth Tk 800 million (US$9.5 million) to help expand operations and distribution of funds in Bangladesh.

The three-year bond, listed on the UK stock market, was placed with asset managers dedicated to emerging markets, with the deal arranged by Standard Chartered Bank and Bank of America Merrill Lynch.

The proceeds from the bond will be used to provide financing to Bangladesh's private enterprise PRAN Group to boost their processing capacities and deepen the rural distribution reach.

IFC bonds are rated triple--by Moody's Investors Service and Standard & Poor's.

Since the inception of the local currency-lending programme in the early 2000s, the IFC has extended more than $16 billion in financing to its clients globally, in more than 50 currencies, including the Indian Rupee, Chinese Renminbi, Brazilian Real, South African Rand, Turkish Lira, Kazakh Tenge, Sri Lankan Rupee, Cambodian Riel, Myanmar Kyat and Russian Ruble.