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A Special Government Bond is to be issued in efforts to mobilize capital to increase the paid up capital of the old state owned financial institution, the Development Bank of Ethiopia (DBE).

One of the 17 proclamation amendments tabled for the parliament’s review on Tuesday, March 22 indicated that the government plans to issue bonds worth 2.56 billion birr. The sales will be manages by Ministry of Finance and Economic Cooperation (MoFEC), according to the document. The bonds will be redeemable after 10 years with a grace period of five years.

The bonds are expected to expand the banks capital and in turn its capacity to increase loans developmental projects by private and public institutions. DBE is well known for providing loans for different priority sectors of the government’s development plan, most recently, the bank’s paid up capital was approved for anexpansion of 4.5 billion birr – from three to 7.5 billion.

“It is difficult to inject the adequate amount of capital into the bank from the public treasury at once, thus it is necessary to issue a bond,” the document attached with the draft proclamation explained.

Currently over 1.9 billion birr of capital secured from different sources has already transferred to the bank. However, the document does not specify if the remainder of the capital will be collected from local or international sources.

Established in 2009, DBE is engaged in providing short, medium and long-term development credits on a project basis. Specials bonds were most recently issued to raise the paid up capital of another state owned financial firm, Commercial Bank of Ethiopia. Bonds worth 2.5 billion birr were issued to enable the bank’s engagement in various forms of credit provision.