Bangladesh’s 2008 Article IV Consultation reports that growth picked up strongly from a slow start to the year with rebounds in agriculture and garment exports playing a leading role. Strong growth of remittances and increased external assistance helped support the balance of payments in the face of rising import costs. An impressive increase in government revenues, bringing state-owned enterprise losses onto the budget, and the substantial increase in administered prices have been significant achievements.
1. This statement summarizes economic developments since the issuance of the staff report to the Executive Board. These developments do not alter the thrust of the staff appraisal.
2. Money growth continued to be rapid with reserve and broad money growing at 19 percent in July and credit growth approaching 26 percent. Bangladesh Bank responded on September 16 by raising their repo rate by 25 basis points to 8¾ percent. The CPI for July still has not been released by the authorities.
3. The taka remains stable against the dollar and net international reserves have declined by around US$170 million thus far during FY09 mainly reflecting valuation changes.
4. Government revenue performance in early FY09 was strong with collections through August 19 percent higher than in FY08. Recent declines in international oil prices make it more likely that budget provisions will be able to cover the losses of the state–owned petroleum company but, unless prices decline further, losses will continue to accrue.
5. Recent weeks have seen significant floods in the southern and central regions, but water levels have begun to recede and, at present, there are no indications that the calamitous flooding of 2007 will be repeated.
6. The political situation has evolved since the staff report was issued. The leaders of both main political parties have now been released on bail and are planning to participate in their respective party’s preparations for national elections. The Election Commission is expected to announce very soon a late December date for national elections and to clarify its position on holding additional local government elections prior to the national elections.