IMF: Vibrant bond market to help stocks improve

International Monetary Fund has urged the Bangladesh government to make bond market vibrant so the stock markets get a boost. The visiting IMF mission headed by its consultant Brain Aithken addressed a press briefing at the Bangladesh Bank auditorium in Dhaka on Thursday. “The government is taking loans from saving instruments as a financing vehicle for the budget. But this prevents expansion of government securities market. The government should change this policy and make bond market vibrant,” said Brain Aithken. He said the government should have a long-term policy for this purpose and give more emphasis on bond market. “The bond market should be vibrant for long-term investment in local stock markets,” Brain said. At present, the profit rate of national saving certificates remained high. As a result, the expenditure of the government has increased. The government has to look into the local bond market to control huge borrowing from the government’s saving instruments, IMF mission chief said. “The authorities could consider whether there are better targeted and less costly alternatives that achieve the government’s social policy goals without distorting financial markets,” Brain Aithken said. He recommended Bangladesh maintains a healthy foreign exchange reserves to ward off any external shocks. “Bangladesh economy will continue to depend on exports for growth and remains specially exposed to the changing external environment.” As commercial banks’ ability to carry out this function will remain limited, policies that develop the country’s capital markets for financing long-term private investment would greatly improve future growth prospect, he added. The mission visited Bangladesh to assess the economic health of the country and the financial sector as part of an Article IV agreement.