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Dhaka Tribune

NRBs cashing in more on their dollar bonds than buying them

The government repaid more debts in dollars than selling the bonds amid the dollar crisis

Update : 23 Oct 2022, 07:22 PM

All the three types of dollar and non-resident Bangladeshi (NRB) bonds worth Tk207 crore were sold in the first two months (July and August) of the current fiscal year FY23, while its encashment doubled worth Tk421 crore in the said period.

The Bangladesh Bank's latest analysis revealed that in the first two months of FY23, the government's net debt in dollar bonds decreased by an equivalent of Tk214 crore in US dollars.

Expatriates usually invest in these bonds in foreign currency, but the question remained why dollar bond sales were falling at a time when dollars were hard to find.

Requesting anonymity, a central bank official told Dhaka Tribune that despite an increase in global interest rates, the government reduced the interest rate on NRB bonds in April earlier this year, as well as amending the investment limit several times.

Data analysis also showed that during the period, the Wage Earner Development Bonds (WEDB) worth Tk126 crore were sold.  

But at this time, the actual repayment of the bonds bought by expatriates earlier was Tk283 crores (equivalent to dollars.)

As a result, net debt decreased by Tk157 crore.

On the other hand, US dollar investment bonds were sold worth Tk34 crore but Tk121 crore worth of dollar bonds were repaid.

Hence, net sales decreased by Tk87 crore.

However, the sale of US dollar premium bonds increased by Tk31 crore.

In the first two months Tk16 crore worth of premium dollar bonds were paid against new sales of Tk47 crore.

In economic terms, the net sale of dollar bonds is considered a loan or government's borrowing.

Developments

Earlier there was no ceiling on investment in all types of dollar bonds.

However, through a directive on December 3, 2020, the combined investment limit for three types of bonds was set at equivalent of Tk100 crore.

Later, on April 4 next year, interest rates on all types of bonds were reduced.

However, in that directive the government removed the upper ceiling on investments in two US dollar related bonds so that NRBs could invest as much as they want in both securities, according to a notification from the Internal Resources Division (IRD).

Both of these bonds mature in three years.

In the case of the US Dollar Premium Bond, the interest rate on investments of up to $100,000 will be 5.5% at maturity in the third year.

Meanwhile, the interest rate at maturity for investments of between $100,001 and $500,000 will be 4.6% while investments above $500,001 will get 3.5%.

Investors would previously get 7.5% interest regardless of the investment slab after the three-year period.

In the case of the US Dollar Investment Bond, investors used to get 6.5% interest upon maturity.

Now, investors will get 5% interest for investments of $100,000 after maturity while the rate for investments of between $100,001 and $500,000 will be 4%.

When it comes to investments higher than $500,001, investors will get 3% interest, according to the notification.

The government introduced the two bonds in 2002 to attract NRB investment in Bangladesh.

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