Bangladesh has taken a new step toward more flexible public debt management by buying back government securities before their maturity, introducing a market-based tool to manage repayment pressures and refinancing risks.

The Bangladesh Bank conducted the country’s first-ever government securities buyback auction on Thursday on behalf of the Finance Division. The move is part of broader reforms aimed at making public debt management more active, modern and responsive to market conditions.

Under the mechanism, the government can repurchase outstanding securities from investors before their scheduled maturity. Such buybacks are internationally recognised as part of Liability Management Operations (LMO), allowing governments to adjust the timing and structure of debt repayments rather than waiting for large obligations to fall due at once.

The first auction involved two-year Treasury bonds issued in November 2024. A total of 56 bids worth Tk2,016.14 crore were submitted, of which bids worth Tk1,716.14 crore were accepted.

The Finance Division said the initiative would help reduce the pressure associated with large one-off debt repayments while allowing the government to better manage refinancing risks. It is also expected to create a more balanced maturity profile for public debt and improve the efficiency of the government securities market.

The move forms part of Bangladesh’s broader effort to balance the cost and risks of government borrowing and strengthen the domestic government securities market. The country’s Medium-Term Debt Management Strategy also places emphasis on managing borrowing costs, maturity risks and refinancing pressures more strategically.

Further buyback auctions may be held depending on market conditions, the government’s cash position, liquidity, investor demand and the overall structure of public debt.

The new mechanism gives the government an additional option to adjust its borrowing and repayment profile, potentially making domestic debt management more flexible and market-oriented.