- Government mulls Tk 1,000 crore lifeline
- Liquidity crunch threatens ICB market role
- Central bank resists citing inflation risks
- DSEX plunges ten percent in a month
The government is considering providing Tk 1,000 crore to the Investment Corporation of Bangladesh (ICB) through the revised national budget to mitigate its liquidity crisis and ensure stability in the stock market.
Senior finance ministry officials discussed the issue in a recent meeting, and the fund might be provided once top officials, including the finance adviser, return from an official visit to Washington, said confidential sources.
The sole state-run investment bank collects and reinvests funds through different means, including fixed deposit receipts (FDRs), bonds, and shares.
After the interim government came to office last year, the ICB sought fund support from the Financial Institutions Division (FID), which relayed the request to the ministry and Bangladesh Bank.
The FID’s capital market department urged the ministry in a letter last month that the ICB should be provided Tk 13,000 crore at a low interest rate for a 10-year period, including a two-year grace period.
Its logic was that the ICB is playing an important role in bringing stability to the stock market but is suffering from a liquidity shortage.
Since 2010, the ICB has collected Tk 13,000 crore in funds through different means, such as opening FDRs and issuing bonds.
As of September, the deadline has passed for the return of Tk 6,000 crore, which includes principal amounts and interest, and the amount is rising.
Besides, the ICB needs to make interest payments of Tk 90 crore every month.
Even in this situation, the ICB had to purchase 66 lakh shares of National Tea Company with Tk 80 crore following a government directive.
“It intensified the liquidity crisis of the ICB,” according to the FID letter.
In response, the central bank refused to provide any funds, saying it would fuel inflation in the country, which was already at an elevated level.
“Providing such funds may lead to uncertainties in availing budgetary support from international development partners,” read a BB letter to the FID.
Providing such funds is also contradictory to the contractionary monetary policy, while the long repayment tenure is also in violation of the Bangladesh Bank Order, 1972, it added.
The BB suggested availing funds from the government through the revised national budget, which would fuel inflation at a comparatively lower rate.
The ICB needs at least Tk 5,000 crore considering its huge liabilities and if proper support is to be ensured for the market, ICB Chairman Prof Abu Ahmed told The Daily Star.
“…they gave the nod to provide funds next January,” he said.
However, the ICB requested that funds be provided as early as possible, as the market is now on a downward trend where share prices are low.
The DSEX, the prime index of the Dhaka Stock Exchange, plunged around 10 percent, or 512 points, over the past 30 days.
“If the ICB can get the funds and invest it now in the down market, the investment will see profit soon… we can make high capital gains and repay the dues from the gains,” he said.
In 2024, the government provided Tk 3,000 crore in support to the ICB through a sovereign guarantee. Of it, Tk 2,000 crore was used for the repayment of loans.
The rest of the fund was invested in the stock market, and there is around a 20 percent capital gain on that investment, added Ahmed.
https://www.thedailystar.net/business/economy/news/govt-plans-tk-1000cr-icb-ease-liquidity-crisis-4013391
