Bangladesh is gearing up to launch its inaugural sovereign dollar bond in global capital markets, aiming to raise between $500 million and $1 billion. This move is part of the government's strategy to diversify its funding sources, moving beyond traditional loans from development partners. The bond is anticipated to be issued by December, pending final approval from the Alternative Financing Committee, which is led by Finance Minister Amir Khosru Mahmud Chowdhury.
Tanvir Shahriar Ghani, special assistant to the prime minister for investment and capital market affairs, confirmed that the government has received positive responses from investors regarding the dollar-denominated bond. Ghani also heads a high-powered committee formed in July to explore sovereign bond issuance and alternative financing. This committee has held several meetings and decided to proceed with a dollar-denominated bond, though the exact amount is still under consideration.
The committee is also evaluating Bangladesh's eligibility for inclusion in JPMorgan's Emerging Markets Bond Index (EMBI), a benchmark for international government and corporate bonds from developing countries. To qualify for this index, debt instruments must have an outstanding face value exceeding $500 million. Beyond the initial dollar bond, Bangladesh is considering other foreign currency structures, including Panda, Samurai, Dim Sum, and Sukuk bonds, with discussions for Panda Bonds having commenced even before the committee's formation.
Economists, however, have expressed caution, citing Bangladesh's weak macroeconomic indicators, governance issues, and the potential for high borrowing costs. Zahid Hussain, a former World Bank economist, warned that the country's credit rating, which Fitch Ratings affirmed at "B+" with a negative outlook in May, could lead to borrowing rates of 7-8 percent in dollar terms. He also emphasized that the funds should be allocated to commercially viable projects capable of generating revenue to service the debt, highlighting concerns about weak revenue mobilization and project implementation capacity.
