Asian Development Bank (ADB) will sign $250m loan deal today to help continue capital market reforms in Bangladesh.
The deal will be inked under the third capital market programme (CMDP-III) that represents a continuation of previous works carried out so far.
After signing of the agreement, $80m will be disbursed in the first installment and the remaining $170 million by December 2017.
Reforms planned include increased liquid benchmark issues through introduction of floating rate notes, enhanced insurance industry participation in the capital market by issuing investment guidelines by the Insurance Development and Regulatory Authority (IDRA), improvements in the settlement and clearing system as well as promotion of alternative financial instruments to develop a deeper and broader capital market, according to the ADB’s opinion.
Besides, the ADB proposed reforms to some laws of IDRA and Bangladesh Bank relating to the capital market. The bank will provide an additional $70m in this regard.
Following a bull run in 2010, the country’s stock markets crashed in December 2010, and by March 2011, the index had fallen by half from its all-time high, wiping out large share value gains.
“The crash resulted in bankruptcies, loss of employment and disruption to the economy. It also underscored the vulnerability of Bangladesh’s capital markets and confirmed the pressing need for reforms,” said the ADB.
Further structuring of the capital markets will require continuation of the technical approach adopted under CMDP-II and close collaboration with the coalition of stakeholders to crucially maintain the momentum of reforms.
Reform initiatives under CMDP-II under which ADB provided $300m were successfully implemented and completed by the end of 2014.
Demutualisation of the stock exchanges in Dhaka and Chittagong was one of the achievements of the reform initiatives.
