core sector communique

Government Securities Market Development in Bangladesh

 

 

A robust, diverse, and inclusive financial systems help reduce poverty by promoting economic growth, broadening the scope for social and economic mobility, and directly improving the lives of poor people through access to financial services. An efficient and liquid domestic debt market is important for public debt management, bank liquidity management, and monetary policy implementation. The current global financial crisis has reinforced how important it is for a country to have robust domestic debt markets.

Development of an efficient and liquid domestic debt market has become an important policy agenda of the Government of Bangladesh. Both Ministry of Finance and Bangladesh Bank have recently created separate debt management units realizing the ultimate objective of developing an efficient secondary market of government securities.

A World Bank team, along with Bangladeshi Authorities, has recently revisited the status of the government securities market in Bangladesh and identified critical areas to address for its further development. The team notes that the transparency in the primary market of government securities has improved in recent years with the introduction of auction calendar and publishing auction results. However, the auction system has remained manual. Moreover, the demand for government securities heavily replies on captive source. Therefore, there is scope for the market development of both primary and secondary markets of government securities.

In this respect, the regulators, market participants and the World Bank team identified a few critical areas to address to bring further improvements in the primary and secondary markets of government securities. For example, it has been agreed that automation of the auction and registry systems will improve efficiency of the primary market. It is also important to review and improve the current primary dealer systems. Similarly, securities market development needs to avoid fragmentation of instruments by aligning the National Savings Schemes rates along with T-Bills and T-bonds. Government of Bangladesh is committed to implement a range of key next steps in these identified areas.

The team also appreciates government’s recent steps to raise awareness of the treasury securities. It also reiterates the opportunity of creating enabling regulations through improved coordination between the regulators.