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Bangladesh is preparing to enter the international capital market for the first time with a sovereign bond of up to US$1 billion, with the government aiming to complete the maiden issuance within the next three months.
The government is currently in the process of appointing global financial services firm JPMorgan Chase & Co. as the issue manager for the bond, which is targeted for launch by December, according to official sources.
A Bangladeshi delegation recently held meetings with institutional investors in several European countries and New York to gauge market interest in the proposed issuance.
Around 15 major global investment firms, including BlackRock, Pacific Investment Management Company (PIMCO), Texas Pacific Group (TPG), Macquarie, GoldenTree Asset Management and MetLife, have reportedly shown preliminary interest in the sovereign bond, according to a Bloomberg report.
“Investor interest in our sovereign bond is extremely high,” Tanvir Shahriar Ghani, special assistant to the Prime Minister on investment and capital market affairs, said recently.
Tanvir heads a high-level committee formed by the Finance Ministry in July to assess the feasibility of issuing the country’s first sovereign bond in international markets.
He said further discussions were needed before finalising the bond’s structure, interest rate and legal framework.
“The government is closely monitoring the rising cost of borrowing in global markets, and the final decision will be made after evaluating investor rate expectations,” he said.
If successfully issued, the bond would establish a benchmark for Bangladesh’s sovereign borrowing costs in global capital markets and could provide the country with direct access to foreign currency financing on market-based terms.
Bangladesh has historically relied heavily on concessional financing from multilateral development partners such as the World Bank, Asian Development Bank (ADB), Japan International Cooperation Agency (JICA) and International Monetary Fund (IMF), alongside bilateral loans.
However, changing global interest rates have affected borrowing conditions as the country faces rising development expenditure, debt-servicing obligations and demand for foreign currency.
With the national budget for the current fiscal year set at Tk9,38,000 crore, the government needs substantial financing to cover the budget deficit.
Entering international debt markets is therefore being considered as a way to diversify the country’s financing sources and establish a regular presence in global capital markets.
The maiden issue is most likely to be denominated in US dollars because of the currency’s deep and liquid international bond market.
The government is also exploring other options for future issuance, including Samurai bonds denominated in Japanese yen, Panda bonds in Chinese yuan, Dim Sum bonds in Hong Kong and Shariah-compliant Sukuk.
Bangladesh Bank has already held discussions with a delegation from the Export-Import Bank of China on the potential issuance of Panda bonds.
Officials said the initial target for the maiden bond is US$500 million, but the amount could be increased to as much as $1 billion if market conditions remain favourable.
The government, however, is weighing the implications for the country’s sovereign credit rating, foreign exchange debt-servicing capacity and overall borrowing costs before proceeding.
Officials said the objective is to diversify external financing without creating excessive pressure on Bangladesh’s future foreign debt obligations.