The government is going to begin clearing arrears to fertiliser importers and independent power producers (IPPs) from today by issuing special bonds with a maximum interest rate of 7.5 percent.

A finance ministry official said a four-party agreement would be signed for the payment and the ministry would send a consent letter to the central bank to issue the special bonds.

The bonds will remain effective for eight, nine and 10 years.

The government decided to issue these special bonds, worth around Tk 26,000 crore, to clear arrears to IPPs and fertiliser importers that have remained unpaid for months.

Fertiliser importers have arrears of Tk 12,000 crore while IPPs have arrears of Tk 14,000 crore.

The bonds, a debt instrument, will be used as loan repayments to 40 banks on behalf of power producers and fertiliser suppliers.

The finance ministry official added that they would issue special bonds worth around Tk 4,000 crore through a state-owned bank for the Bangladesh Chemical Industries Corporation (BCIC) and the Bangladesh Agricultural Development Corporation (BADC).

Special bonds worth around Tk 450 crore will also be issued through a private commercial bank for private sector fertiliser importers.

"We are starting with two banks and the rest will follow gradually," a senior official of the finance ministry told The Daily Star.

The official added that banks would receive interest on the bonds every six months, and can use the amount towards their statutory liquidity ratio, the minimum percentage of deposits a commercial bank has to maintain in the form of cash or securities.

This is the first time in over 10 years that the government is issuing bonds to clear unpaid bills.

In fiscal year 2012-13, the government had issued bonds to repay outstanding subsidies to the Bangladesh Petroleum Corporation.

It took the decision because of a condition stipulated for a $987 million loan from the International Monetary Fund (IMF) that barred the government from repaying dues incurred as subsidies to the BPC by borrowing from banks.

In January this year, the IMF approved a $4.7 billion loan to Bangladesh but did not set any direct conditions about subsidy payment.

However, the IMF did advise the central bank to follow a strict monetary policy and ensure that banks do not possess any investable funds in order to contain inflation and ease pressure on the nation's forex reserves.

A finance ministry official said they usually borrowed from banks for deficit financing of the budget through treasury bonds or bills.

As per traditional practices, they could have paid the arrears by borrowing through treasury bonds, but that may not have been accepted by banks due to the strict monetary situation.

So, they took the initiative to clear the arrears by issuing special bonds.

The Bangladesh Bank is expected to announce a tight monetary policy for the next six months by the end of this month.