ADB Taka Bond Launch Stalls Due to Regulatory Deadlock

The launch of taka-denominated bonds by the Asian Development Bank (ADB) is facing significant delays as the lender and Bangladeshi regulators remain at odds over several key policy issues. Although first proposed in 2019, the initiative—intended to fund development projects through local and global subscriptions—has hit a stalemate.

The primary points of contention involve regulatory oversight and national fiscal stability. The ADB is seeking "evergreen" or recurring approval for bond issuances, but the government insists on defined time limits for any granted authority. Additionally, the ADB wants local institutions to be allowed to purchase these bonds without prior central bank approval, a move regulators argue would bypass essential capital account controls.

Further friction exists regarding the ADB’s request for tax exemptions on investment income and the right to use the word "Bank" in its marketing without a domestic banking license. Most critically, financial regulators have rejected the proposal to allow these bonds to count toward the statutory reserve requirements of commercial banks. Officials fear this could reduce demand for government securities, making it more difficult for the state to finance its budget deficit.

Despite these hurdles, government officials acknowledge that successful bond sales on international markets could boost foreign-currency reserves and enhance Bangladesh's global financial profile. Currently, a special assistant to the Prime Minister is working with the Ministry of Finance to find a way forward.