CAPITAL MARKET REVAMP
Policies to be reformed
ADB has been supporting the government�s
initiatives to improve
capital markets, and this new assistance will help
the government strengthen the markets further
STAFF REPORTER
Bangladesh government is going to reform a number of policies to receive additional funds of USD 250 million from the Asian Development Bank (ADB).
The ADB and the Bangladesh government yesterday signed agreements for $250 million in loans to help Bangladesh continue capital market reforms, which should boost private investment and support the countrys drive to achieve middle-income status by 2021.
Saifuddin Ahmed, joint secretary of the Economic Relations Division (ERD), and Kazuhiko Higuchi, country director, Bangladesh Resident Mission of the ADB, signed the agreement on behalf of Bangladesh and the ADB respectively, at a ceremony at the ERD office in Sher-e-Bangla Nagar, Dhaka.
After signing the agreement, it was announced that the Bangladesh government has pledged to fulfil at least 26 conditions vis--vis capital market reforms against budgetary support.
The government has reformed 10 policies relating to the capital market, Ahmed said.
The ADB will disburse the budgetary support in two instalments, and in accordance with its suggestions, the government will have to fulfil eight conditions within eight months of the financial agreement.
The first instalment will see as much as USD 80 million disbursed. The government will receive the remaining USD 170 million after implementing the remaining conditions by December 2017, Ahmed said. The ADB has been supporting the governments initiatives to improve capital markets, and this new assistance will help the government strengthen the markets further, said Higuchi.
The third programme supports policy actions to strengthen the Bangladesh Securities and Exchange Commission, boost institutional investor demand, broaden the supply of financial instruments, including sukuk, and promote a more liquid government bond market.
In the Seventh Five Year Plan (SFYP), the government has set a target to achieve annual gross domestic product (GDP) growth of 8 per cent in the fiscal year 2020.
Achieving this goal will require more private investment. Further development of the capital markets is an important catalyst towards that end.
The ADB-supported Second Capital Market Development Program helped stabilise the Bangladesh stock market after the turmoil in 2010 and aided the passage of key financial sector legislation.
The third programme will strengthen the Bangladesh Securities and Exchange Commission and support the establishment of a clearing and settlement company.
It will also provide support in new areas, such as strengthening the Insurance Development and Regulatory Authority to promote the insurance industrys growth and stability, and encourage insurers to use the capital markets more. To increase the supply of high quality bonds and other market instruments, policy actions will draw up rules for Islamic finance, including sukuk, among other aspects.
The ADBs loan will be complemented by a technical assistance grant of USD 700,000 to support the implementation of key reforms, including the installation of the information and communication technology (ICT) system.
The ADB will provide a USD 400,000 grant and will administer a USD 300,000 grant from the Republic of Koreas e-Asia and Knowledge Partnership Fund.
The programme will be completed by the end of 2017. The ADB, based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth, and regional integration.
Established in 1966, it is owned by 67 members, 48 of which are from the region. In 2014, ADB assistance totalled USD 22.9 billion, including co-financing of USD 9.2 billion.
