The Finance Minister has announced an increase in interest rates for the US Dollar Premium Bond and US Dollar Investment Bond, targeting investments up to $100,000. The move is aimed at attracting funds from the Bangladeshi diaspora and foreign citizens with Bangladeshi origins to bolster the country’s dollar reserves.
As per the recent notification by the Internal Resources Division, interest rates for the premium bond are now 6.50%, 7%, and 7.50% for the 1-year, 2-year, and 3-year terms, respectively. For the investment bond, rates are set at 5.50%, 6%, and 6.50% for the same terms. Buyers can acquire these bonds from authorized dealer branches of banks within the country, Bangladeshi bank branches abroad, and exchange houses.
The finance ministry circular outlines that new investments will be calculated by adding up previous investments, with the interest rate applicable at the time of purchase. Investors can choose to receive reports of their investments in dollars or taka.
Bangladesh Bank data reveals that the net sales of the US Dollar Premium Bond were Tk1.5 crore in FY21, while the US Dollar Investment Bond had a negative net sale of Tk84 crore. During FY22, both bonds showed negative net sales at Tk103 crore and Tk876 crore, respectively. In the July-October period of FY24, the net sales were negative at Tk11 crore and Tk86 crore for the Premium and Investment Bonds, respectively.
Tarek Mohammad Zakaria from the Internal Resources Division explains that the global trend of increasing interest rates, observed in countries like the United States, the United Kingdom, and Europe, has prompted Bangladesh to adjust its rates to attract investment. This move is also aligned with the government’s aim to provide additional benefits to expatriate Bangladeshis.
The Bangladesh Bank had proposed a 2% increase in interest rates on all three bonds, in line with international markets. An expatriate investor mentioned that Bangladesh, contrary to global trends, offered lower rates, contributing to a wider financial account deficit. The investor highlighted that the government’s insufficient marketing efforts and lack of public awareness led to lower-than-expected investments in these bonds.
Despite the potential of the diaspora bonds to alleviate the dollar crisis by encouraging remittances through official channels, inadequate promotion has resulted in less than $1 billion outstanding investment in all three government-issued bonds for non-resident Bangladeshis at the end of FY23, compared to nearly $3 billion in FY22, according to Bangladesh Bank data.
