Page 31 - ICE BUSINESS TIMES December 2019

Taka bonds are a more
sustainable form of foreign
borrowing compared to dollar
denominated debts for
Bangladeshi entities that only
have earnings in local currency.
Such issuances allow the
Bangladeshi entities to avoid the
exposure to currency risk while providing
access to international investors who seek exposure
to the Bangladeshi Taka and the corresponding
higher yield. It also raises the profile of Taka in
international markets, improve the country’s image
and help attract FDIs. Effective use of the instrument
can, therefore, boost up investments in the private
sectors of the country. Going forward, it would be
worth exploring whether such bonds can be issued
for tenors longer than the three years tenor of the
“Bangla Bond” issued by IFC recently – that will be
even more effective since the private sectors in
Bangladesh severely lack access to long term funds
currently.”

Arif Khan
PHOTOGRAPH : IFC IDLC Finance Limited
CEO and Managing Director

An Instant
projected to grow at 7.2 per over the past three decades, A Game the applicable dollar-taka Hit!
cent this fiscal year and 7.3 in recent years, the share of exchange rate, with the
per cent, the year following. private investment in GDP Changer investors taking on the An initiative of the
Most importantly, has remained static. The Bangla Bond debuted as a exchange rate risk. On coupon International Finance Looking
Bangladesh has met United Private investment-GDP taka- denominated debt payment dates and upon Corporation, Bangla Bond has
Nations criteria to graduate ratio has remained stuck at instrument, on the London maturity after three years, IFC brought onboard a new set of Ahead
from "least developed 23 per cent for the past few Stock Exchange on November will take the taka earnings foreign investors, it also an The listing of Bangla Bond is
Some remarkable country" status by 2024. years, which has raised 11. Issued by the World Bank from its investments in investors often face acid test for the sustainability a silver lining among the
achievements have marked Despite the accomplishments, uncertainty about robust Group's private sector lending Bangladesh and convert the significant hurdles while of Bangladesh's growth. The dark clouds of uncertainty in
the past few years for there are several aspects of future growth. Private arm International Finance amounts back into dollars to trying to invest in interest from investors has Bangladeshi private sector.
Bangladesh; the country has the economy which are investment is essential to Corporation (IFC), the bonds pay the offshore investors in Bangladesh; they range from been remarkable, leading to a Although the size of the
become one of Asia's most concerning. There are a few generate growth and are worth $9.5 million, and the taka bonds. logistical to infrastructural 30 per cent oversubscription initial offering is meagre
incredible and unexpected worrying indicators which employment for the the proceeds will be used for impediments. Bangla Bond of the first tranche. The compared to the demands of
success stories. Aided by have prompted the growing workforce. In order investment in private Leverage of will make the process easier proceeds of the first tranche our economy, it has the
robust growth in the stakeholders of our economy to achieve an 8 per cent infrastructure projects, as Local and hassle-free. The local were converted to taka and potential to be a
manufacturing sector and worried about the growth by 2020, the Private well as public-private currency bond issuance can lent out to Pran-RFL Group, groundbreaking event in our
incremental rise in in-bound sustainability of the rapid Investment-GDP ratio partnership initiatives. All Currency bypass the risks of borrowing which was about Tk 80 crore, history in terms of alluring
remittances, Bangladesh has growth. One of the biggest requires to be at least 30 bond payments (including the International investors are in foreign currency, which at 11-11.5 per cent interest. foreign funds for investment
become the concerns for the future of our per cent. The Government initial subscription amount often interested in local can be subject to fluctuating IFC plans to issue multiple in building essential
second-fastest-growing economy is the poor state of of Bangladesh has recently and any subsequent coupon currency-based bonds because exchange rates; so it makes tranches amounting to $300 infrastructures and play a
nation in South Asia. private sector investment. issued Bangla Bond to and principal payments) will they do not carry the risks of sense that local investors million over the next couple crucial role to help us
According to the World Bank, Despite the gradual rise in solve the stagnant private be settled in dollars, in an interest rate fluctuations. would prefer to borrow in of years, with the next round achieve our Sustainable
Bangladesh's GDP is the investment-GDP ratio investment scenario. amount determined based on Concurrently, foreign local currency. taking place early next year. Development Goal Targets.

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