Govt issues first batch of special bonds

The government today issued special bonds, the second time after fiscal 2012-13, worth of Tk 3,016 crore to two banks in order to clear arrears on behalf of fertiliser importers.

The importers had opened letters of credit with the banks to bring over fertilisers, the payment for which is long overdue from the government.

A four-party agreement was signed for the payment and the bonds were issued against state-owned Sonali Bank and privately-owned IFIC Bank at the policy rate or repo rate, which is now 7.75 percent.

The repo rate is the interest rate at which the central bank lends money to commercial banks.

The finance ministry issued bonds worth around Tk 2,557 crore to Sonali Bank on behalf of Bangladesh Chemical Industries Corporation (BCIC) and Bangladesh Agricultural Development Corporation (BADC).

Besides, bonds worth around Tk 459 crore were issued to IFIC Bank on behalf of four private sector fertiliser importers.

These bonds will remain effective for three periods -- eight, nine and 10 years.

Earlier, the government decided to issue these special bonds, worth a total of around Tk 26,000 crore, to clear arrears with independent power producers (IPPs) and fertiliser importers that have remained unpaid for months.

The bonds, a debt instrument, will be used as loan repayments to 40 banks on behalf of power producers and fertiliser suppliers.

A finance ministry official said the rest of the arrears would gradually be cleared through the issuance of special bonds.

A Bangladesh Bank official said interest would be paid every six months as per the policy rate against the bonds.

Besides, the banks will be able to incorporate the bonds in their calculation of statutory liquidity ratio (SLR), which is the minimum percentage of deposits that a commercial bank must maintain.

Moreover, with the bonds, the arears with the banks will be cleared, the official added.

In fiscal year 2012-13, the government had first issued such bonds to pay subsidies outstanding with Bangladesh Petroleum Corporation.

It took the decision for an International Monetary Fund (IMF) condition over a $987 million loan which barred the government from borrowing from banks to pay dues with the BPC in the form of subsidies.