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Bangladesh Priorities: Secondary Bond Market, Mortaza

Research by M.G. Mortaza, an economist at the Asian Development Bank, and Wasel Bin Shadat, a lecturer in econometrics at the University Of Manchester, examines a related proposal to boost investment and drive economic growth: creation of a secondary bond market. The lack of a well-developed bond market and, by extension, the absence of an advanced financial sector, impedes economic growth.

The authors examine a proposal to establish an active secondary bond market so that government and private sector can mobilize more resources for long-term investments. The Asian Development Bank is currently funding a government program with Tk 19.5 billion (Tk 1,950 crore) to implement the structural reforms needed to increase liquidity in the bond market, broaden and diversify the investor base, and enhance the supply of alternative financial instruments. 

 

Strategy Takas of benefits per taka spent
Bond market 3

One major benefit of the reforms would come from lower interest rates that would result, which are closely associated with higher investment and increased economic growth. A second major benefit would come from the reduced transactions costs that would come from a more transparent Bangladeshi bond market.

Overall, each taka spent toward creating a bond market to mobilize more resources for long-term investments could do perhaps 3 takas of good