Buyback of govt securities, new strategy for public debt dealing

Securities and exchange commission

Dhaka, Oct 8 — Bangladesh on Thursday conducted its first-ever auction to buy back government securities before their maturity, marking a new step in the country’s public debt management.

The Bangladesh Bank conducted the buyback operation on behalf of the Finance Division as part of the government’s efforts to make debt management more active, modern and market-oriented, according to a press release issued by the Finance Minister’s Office.

Under the buyback mechanism, the government can repurchase existing government securities from the market before their maturity. The method is internationally recognised as an important tool of Liability Management Operations (LMO).

The Finance Division said the initiative would help reduce the pressure of making large one-off payments when government debt matures and help manage refinancing risks.

It would also allow the government to make the repayment schedule of its debt more balanced while improving the efficiency of the government securities market.

The first buyback operation is part of a series of reforms being undertaken by the Finance Division to balance the cost and risks of government borrowing, ensure sustainable debt management and develop the government securities market, the release said.

The government may conduct similar operations in the future in line with the objectives of its Medium-Term Debt Management Strategy (MTDS), it said.

Future buyback auctions will be considered based on market conditions, the government’s cash position and debt management requirements.

The government will also take into account market liquidity, investor demand and the structure of public debt when deciding whether to conduct further buyback operations, according to the release.

The move gives the government an additional instrument to manage the timing and structure of its domestic borrowing and repayment obligations. - UNB