IFC, govt to launch $1b offshore taka-linked bond

The International Finance Corporation and the Bangladesh government are set to launch a $1 billion offshore taka-linked bond, a move that can help internationalise the currency in the long run.

An IFC team led by its Executive Vice-President Jin-Yong Cai floated the idea of a taka bond to Finance Minister AMA Muhith yesterday in a meeting on the sidelines of WB-IMF spring meetings in Washington DC, which the minister agreed to right away.

“It's good news that they [IFC] are considering issuing Bangladesh bonds,” Muhith told reporters after the meeting. “This is a very important development for Bangladesh.”

In October 2013, IFC, the World Bank's private sector arm, launched an identical bond programme for India. The same model will be followed for Bangladesh.

The proceeds of the $1 billion rupee bonds were used by IFC to finance private sector investment in India.

The initial subscription, repayment of principal and coupon were in dollars but tied to the dollar-rupee exchange rate.

So for the investor, the bond offered the convenience of a dollar-denominated bond but the proceeds were linked to the dollar-rupee exchange rate.

The bond proceeds from dollars were converted to rupees on the domestic exchange market and the rupees were used for investment in India.

Other than the rupee, IFC has also raised local currency bonds in Chinese renminbi, Russian ruble and Brazilian real.

At the press briefing, Mahbub Ahmed, senior secretary of the Finance Division, said the size of the taka bond may be $1 billion.

The Bangladesh bond will be listed on London Stock Exchange, according to a finance ministry official.

The programme will be launched once the government formally gives consent to the proposal, Ahmed said, adding that the central bank and the Finance Division will work together on the plan.

The risk of the exchange rate involved will be borne by IFC, according to Mohammad Mejbahuddin, senior secretary of the Economic Relations Division.

Meanwhile, Muhith held another meeting in Washington yesterday with WB's transport sector team.

The multilateral lender has expressed an interest in making big investment in the country's transport sector, the finance ministry official said.

It has also expressed its willingness to invest in the Dhaka Mass Rapid Transport, Dhaka-Chittagong Expressway, Bangladesh Regional Connectivity project 1 and 2, and Dhaka-Chittagong Inland Water Transport projects.