Bangladeshi expatriates reduced investment in dollar bonds by almost $2 billion in the fiscal year 2022-23 due to a significant cut in interest rates and cumbersome procedures. The country faces a severe dollar crisis and depleting foreign exchange reserves.
The total outstanding investment in government-issued bonds for non-resident Bangladeshis, including wage earners bonds, US dollar premium bonds, and US dollar investment bonds, fell to less than $1 billion at the end of FY23 from nearly $3 billion in FY22.
Lower yields, particularly a cut in interest rates from 5.5%-7.5% to 2%-3.5%, prompted more bond encashment than purchases, resulting in a historic deficit of nearly $4 billion in the first quarter of the current fiscal year. The Bangladesh Bank has proposed a 2% increase in interest rates on all three bonds to align with international markets.
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