Bangladesh to issue dollar bond next year: central bank head
Bangladesh's maiden dollar bond will be launched after the elections, the country's central bank governor tells Emerging Markets
Initially, the Bangladesh government was planning to take advantage of the favourable conditions for emerging markets and issue the bond this year.
Finance Minister Abul Maal Abdul Muhith told Emerging Marketsin early May that the plan for the $500 million bond, which would be increased up to $1 billion, was to have it ready to be issued later in 2013.
But Central Bank Governor Atiur Rahman said in an interview on Friday after a speech at OMFIF in London that the finance minister changed his mind.
"After the points we raised, he has not spoken of it again," Rahman said. He said the central bank favoured the launch of the bond after the elections because this would offer investors more predictability.
Elections must take place within 90 days of the expiration of the current term of the government, which is on December 29.
The size of the bond "could be $500 million but it all depends on the government, it will have to be a government decision," Rahman added.
"But we suggest that it will have to be a smaller amount initially to test the market, test the water, get the benchmark and then it can be repeated if they want."
Emerging market debt has been hard hit by the statement in May by Federal Reserve Chairman Ben Bernanke that the US central bank might cut down its purchases of assets from the markets later this year and end the programme altogether next year.
During his speech in London on Friday, Rahman said the country's macroeconomic fundamentals were good, with economic growth consistently around 6% for the past 10 years.
The target for growth for the next financial year (July 2013 June 2014) is 7.2%, he said.
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Inflation is set to fall to 7.6% next month from 7.7%, while the budget deficit is set to fall to 4.6% of gross domestic product from this year's 4.8%.
"I try to keep the government under my spell so they don't have a budget deficit as high as to disturb my monetary policy," Rahman said.
Bangladesh has a $2 billion external surplus and its foreign exchange reserves, projected to reach $14.8 billion by the end of June, cover five months of imports, he added.
The collapse of a clothing factory building in April, which killed more than 1,100 workers, put the spotlight on working conditions in Bangladesh's flourishing textile industry. A government investigation found that floors had been added illegally to the building and that it was not designed to hold the heavy equipment that was brought in for the factory.
Analysts said at the time that Bangladesh's garment industry would suffer, as Western companies would pull out, but Rahman said this prediction did not come true.
"Despite the tragedy, even last month orders increased," he said. "95% of our factories are world-class compliant."
Apparels make up three-fourths of Bangladesh's total exports.
Rahman identified weakness in governance, corruption and lagging debt market development as the main challenges to the country's rapid development.
He said the central bank has asked commercial banks not to lend to construction companies that do not comply with safety rules. "We'll make sure our factories are compliant," he said.
The central bank encourages banks to give loans to agriculture, small and medium size companies and to industrial companies but discourages financial speculation, Rahman added.
He said his ambition was to see Bangladesh ranked as a middle-income country by 2030.
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