Dhaka, Bangladesh (BBN)- Diaspora bond is a promising fund mobilization option both for the government and the private sector in order to fulfill the requirement of higher investment in the country, Bangladesh Bank Governor Atiur Rahman said.
The central bank chief was addressing a seminar on `Diaspora Bonds: Operational and Implementation Challenges’ held in the World Bank Headquarter in Washington DC on Thursday, according to a message received in the capital Dhaka on Friday.
“Bangladesh has emerged as one of the promising avenues for promoting diaspora bonds with steady, resilient economic growth over the past few decades; remittance emerged as the major source of foreign exchange reserves, large pool of economically active younger population group, resilient banking sector, fast growing mobile telephony and so on,” he said.
BB Governor Dr. Atiur Rahman and Central Bank of Kenya governor Prof. Njuguna Ndung'u spoke at the seminar about the prospects of Diaspora bonds in Bangladesh and Kenya. The seminar was chaired by World Bank managing director Mahmoud Mohieldin.
World Bank’s Lead Economist Dilip Ratha presented case studies of the Philippines, Ethiopia, Nepal and India, while Otaviano Canuto, Vice President and Head of Network, Poverty Reduction and Economic Management, gave an overview of the World Bank’s role in promoting Diaspora bonds throughout the world.
Speaking about the prospects of Diaspora bonds in Bangladesh, Dr Rahman said that bond issuance abroad is among the options under consideration for financing the government’s infrastructure investment projects (including those in PPPs) in power generation, toll bridges, toll roads that will generate future income streams to pay off debts and other costs.
Bangladesh has two US Dollar bonds (‘USD Premium and Investment bonds’) in issue, mainly targeting the Bangladeshi Diaspora abroad but open also for investment by any non-resident individual or institution regardless of nationality.
Available on tap through banks in Bangladesh authorized to deal in foreign exchange or their branches and correspondents abroad, the three-year Premium and Investment Bonds fetch interest in US Dollar respectively at 7.5 and 6.5 percent annual rate at maturity. The interest on Premium Bond is payable only in equivalent Bangladesh Taka (BDT).
Premature redemptions are permissible, at interest rate lowered by 0.5 percent for each year short of maturity.
Total outstanding balance of the two bonds stood at US$ 149.2 million as of end August 2011. The sale volume remains modest in absence of aggressive marketing, another likely reason being that the bonds are not freely tradable, though useable as collaterals.
Sales restrictions on such foreign bonds in the US and other advanced Western countries hosting the better off segments of Bangladeshi Diaspora may also be among the reasons.
BBN/SSR/AD-23Sept11-8:34 pm (BST)