1. This statement contains information that has become available since the staff report was circulated to the Board on October 10, 2006. This information does not alter the thrust of the staff appraisal.

2. Despite emerging power shortages and recurring work stoppages in the run-up to the election, the growth momentum remains strong and inflation continues to ease. Manufacturing growth reached 11½ percent in the last quarter of FY06, up from 8 percent in FY05. Exports rose by 31 percent in the first two months of FY07 over the same period last year, led by woven garments, knitwear, and leather products. Strong domestic demand is set to underpin the growth momentum. Outstanding letters of credit for imports were up by 14 percent (year-on-year) in August and inward remittances continue to grow at close to 25 percent. Inflation remains on a downward trend, aided by a strong taka, and reached 6⅔ percent (year-on-year) in August.

3. On October 5, the Bangladesh Bureau of Statistics issued the Household Income and Expenditure Survey (HIES) 2005. The survey confirms preliminary data in the staff report which shows that poverty has declined considerably. Between 2000 and 2005, the share of the population below the poverty line declined by 9 percentage points to 40 percent. In urban areas the poverty rate declined to 28 percent, whereas in rural areas the poverty rate declined to 43¾ percent. The number of people that have been lifted out of poverty is robust to alternative definitions of the poverty line. The HIES also finds that consumption inequality has dropped slightly at the national level during 2000-05 driven by an improvement in urban areas.

4. Full information on fiscal performance in the first quarter of FY07 is not yet available. Staff estimates that the end-September indicative target for revenue collection is likely to have been observed. Tax revenue through end-September is slightly below target, partly due to the fact that the collection of the new minimum income tax will not begin until November. However, data through August suggest that nontax revenue is likely to compensate for this. Despite revenue developments broadly in line with projections, net domestic financing of the government has been higher than expected, reportedly reflecting advanced implementation of some expenditure items as well as a small shortfall in external financing. As a result, staff projects that the end-September indicative target on domestic financing may have been breached. These developments underscore the importance of enhancing revenue collections and containing overall expenditure, especially during the pre-election period, while continuing to improve the execution of spending in priority areas as emphasized in the staff appraisal.

5. Monetary aggregates are gradually returning to program levels. The central bank continues to tighten monetary policy as evidenced by reverse repo activity and rising treasury bill rates, up 15 basis points this fiscal year. To further mop up liquidity during the transition to a fully developed market for treasury securities, the central bank has reintroduced Bangladesh Bank bills in October. All indicative monetary targets for end-September were met and broad money and private credit growth declined to 20 and 18 percent, respectively. Strong export and remittance receipts have exerted upward pressure on the Taka, which appreciated by 3½ percent against the U.S. dollar since end-August and has helped sustain gross official reserves equivalent to 2.6 months of imports. On October 12, Bangladesh Bank provided a guarantee to Standard Chartered Bank for a one-year trade credit of $250 million to the Bangladesh Petroleum Company for oil financing. The loan is import related and on similar terms as an existing facility with the Islamic Development Bank, and excluded from the program ceiling on short-term debt.

6. On October 5, the Prime Minister approved the divestment of Rupali Bank. A sales and purchase agreement is presently being finalized and will be sent to the Ministry of Law for final clearance. The payment and transfer of ownership is expected to take place in the coming weeks.