“We were going to issue a bond of around $500m-$1bn to finance the Padma Bridge project,” said Abul Maal Abdul Muhith. “But remittances have increased and we have plenty of money right now, so we have no use for extra funds.”
Ba3/BB-/BB- rated Bangladesh lifted debt capital markets bankers’ hopes of a new sovereign issuer last year when it announced its issuance plans. Bond market participants had suggested that Pakistan’s $2bn five and 10 year issuance in April provided the perfect example for Bangladesh and left the path open for a bond.
Remittances from migrant workers have helped Bangladesh’s international reserves increase from the equivalent of three months to seven months of debt payments.
Bangladesh Bank figures show that year-on-year remittance volumes grew by double-digit percentage terms for four consecutive months up to August, the latest available figures.
Moody’s said in August that remittance increases marked “a significant turnaround from the contraction in remittances during fiscal year 2014, which ended June 30”.
Remittances decreased by 1% in the 12 months ending June 30.
“The improvement is credit positive for Bangladesh (Ba3) because it suggests a bolstering of the sovereign’s external payments position, a key strength of its credit profile.”
According to the Bangladesh Bridge Authority, when it completed the 6.15km Padma Bridge, a “high priority national project” will be the longest bridge of its type and “change the economic landscape of the south-western region and ultimately uplift the national economy”.
The World Bank had agreed to provide a $1.2bn credit facility to Bangladesh in order to finance construction of the bridge, but after finding evidence of corruption among Bangladeshi officials and private individuals withdrew the loan in 2012. Bangladesh opted to continue the project with other sources of financing.