Bangladesh
2009 Article IV Consultation: Staff Report; Staff Supplement; Public Information Notice on the Executive Board Discussion
Author: International Monetary Fund
Publication Date:
25 Feb 2010
eISBN:
9781451804294
Language:
English
Keywords:
ISCR; CR; debt; ratio; real GDP; current account; broad money; transmission mechanism; private sector; fiscal year; Exports; Inflation; Global; reverse repo
Download PDF (996.9 KB)

This 2009 Article IV Consultation highlights that Bangladesh’s external position strengthened considerably in FY2009 and the first four months of FY2010. Strong remittances, resilient exports, and weak imports caused the current account of the balance of payments to record a surplus of almost 3 percent of GDP in FY2009, up from less than 1 percent of GDP in FY2008. Amid continued uncertainty about the strength of the global recovery, Bangladesh’s growth momentum is likely to remain somewhat subdued in the near term yet inflation seems set to increase.

Abstract

This 2009 Article IV Consultation highlights that Bangladesh’s external position strengthened considerably in FY2009 and the first four months of FY2010. Strong remittances, resilient exports, and weak imports caused the current account of the balance of payments to record a surplus of almost 3 percent of GDP in FY2009, up from less than 1 percent of GDP in FY2008. Amid continued uncertainty about the strength of the global recovery, Bangladesh’s growth momentum is likely to remain somewhat subdued in the near term yet inflation seems set to increase.

I. Background

1. The political environment has settled down following successful elections. A military-backed caretaker government, which had been in control for 2 years, left office in favor of Sheikh Hasina’s Awami League (AL)-led government in January 2009. Amid high voter turnout, the AL won more than the two-thirds parliamentary majority needed to pass constitutional amendments unchallenged.

2. However, despite a large popular mandate for reform, progress has been limited. The government declared alleviating poverty and reducing consumer prices to be its top priorities. Accordingly, administered prices of fertilizer and diesel were reduced. But implementation of the ambitious election manifesto for economic reforms—needed to unlock Bangladesh’s potential through private sector-led growth—is progressing slowly.

II. Recent Economic Developments

3. Bangladesh’s economy has held up remarkably well despite the global recession. Financial contagion was contained by low levels of financial integration. Growth, estimated at 5.9 percent for FY09, decelerated only modestly from the pace recorded in recent years and remained broad-based. Monetary conditions were increasingly loosened through the summer. However, unlike in some neighboring countries (e.g. India), no fiscal stimulus measures were put in place, apart from a modest budget reallocation aimed at supporting sectors affected by the global downturn. The limited impact of the global downturn on Bangladesh’s growth partly reflects the relatively low overall trade openness, and the large share of basic textiles and garments in total exports, which fared relatively well (Box 1). The resilience of Bangladesh’s exports contrasts with the experience in other countries in Asia where exports are still substantially below the pre-crisis peak.

4. The external position strengthened considerably in FY2009 and the first four months of FY2010. Strong remittances, resilient exports and weak imports caused the current account of the balance of payments to record a surplus of almost 3 percent of GDP in FY09, up from less than 1 percent of GDP in FY08. Gross international reserves exceeded US$10 billion in November, almost double the level in November 2008. This is equivalent to 4.8 months of prospective imports, a 15-year high.

5. This put pressure on Bangladesh Bank (BB)’s monetary policy framework. The improvement in the current account put upward pressure on the taka which BB countered

How did Bangladesh double central bank reserves amid the global crisis?

The capital account remains effectively closed. Therefore, Bangladesh was not affected by the global “flight to safety” towards the end of 2008 and in the first half of 2009.

FDI inflows have stayed at only about 1 percent of GDP per annum, owing to a relatively unfavorable business climate. This level was maintained in FY09 thanks to a large sale of telecom shares.

Exports held up well. Bangladesh’s ongoing gains in global market share accelerated during the first half of 2009 thanks to strength in the lower market segment which held up relatively well.

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Data covers Canada, the EU, Japan, and the US

Various factors contributed to a strong deceleration of imports: an abundant harvest, lower international oil and commodity prices, a deceleration of credit to the private sector, and a wait-and-see attitude in the private sector, which depressed the import of capital machinery.

The continued strong increase in remittances reflected a surge in manpower exports through mid-2008. Reflecting strong demand for unskilled workers in the GCC countries and Malaysia, almost 1 million Bangladeshi nationals migrated in the year through June 2008. The growth of manpower exports from Bangladesh exceeded that from other countries in the region. While Bangladesh is now experiencing a large decline in hiring from abroad (Box 3), remittances are still recording robust year-on-year growth reflecting lags between migration and remittances.

through unsterilized foreign exchange purchases. This caused banks’ excess reserves to rise sharply, sending short-term interest rates below 1 percent (Figure 3). In the absence of reverse repo transactions, the monetary policy framework was rendered virtually inoperative.

6. The accommodative monetary policy pushed up asset price inflation. A decline in international food and commodity prices contributed to a fall in inflation to 2.2 percent in June. But with the accommodative monetary policy, upward pressure on real estate prices has become visible and the stock market has risen by 40 percent since March. As international food and commodity prices began to rise again, inflation rose to 6.7 percent in October.

7. The FY09 budget deficit remained below the budget target, despite revenue shortfalls, owing to continued problems in implementing the Annual Development Program (ADP). Held back by lower imports, customs revenue fell short of the target. As a result, the ratio of NBR revenue to GDP declined by 0.2 percent of GDP to 8.2 percent of GDP, falling short of the original budget target by 0.7 percent of GDP. ADP spending fell short of the original budget by 1 percent of GDP reflecting implementation bottlenecks. The overall fiscal deficit (including grants) amounted to 3 percent of GDP, almost 1 percentage point of GDP smaller than envisaged in the original budget.

8. In the area of structural reforms progress was mixed. Comprehensive plans to address infrastructure bottlenecks, such as the power and gas shortages which are holding back growth, remain under discussion. Progress in Public Private Partnerships (PPP) has been very slow. The reintroduction of interest rate ceilings on important categories of bank lending was a setback to financial market development. The recent appointments made at the Boards of Directors of three state-owned commercial banks (SCBs) were not fully in line with established regulations. The FY2010 budget’s extension of para-tariffs and the introduction of a regulatory duty to a large number of consumer goods raised nominal protection and is second-best to comprehensive tax policy reform.

III. Economic Outlook

9. Bangladesh’s growth momentum is likely to remain somewhat subdued in the near term but inflation seems set to increase. Staff projects growth to decelerate to 5 percent in FY2010 as economic activity is likely to be held back by weak imports, particularly of capital machinery, sluggish exports and private sector credit, and subdued hiring of Bangladeshi workers by employers abroad. The ample availability of liquidity along with adverse base effects related to last year’s unprecedented decline in international food and commodity prices is likely to drive up inflation throughout FY2010, possibly to double digits by the summer. As imports recover, the need for official foreign exchange purchases will be reduced in the second half of FY2010, reducing external pressure on monetary policy.

10. Over the medium term, as global growth and trade recover, Bangladesh’s growth should edge up as well, to around 6 percent per annum (Text Table 1), building on increasing trade integration with countries in the region and the rest of the world, and growth momentum in the agriculture, services, and construction sectors. The current account can be expected to remain in surplus with the import coverage of reserves remaining robust.

Text Table 1.

Bangladesh: Key Macroeconomic Indicators under the Baseline Scenario

(In percent of GDP, unles s otherwise indicated)

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Sources: Bangladesh authorities and Fund s taff estimates and projections.

11. There are both downside and upside risks to the baseline projections. A prolonged global slump could hold back exports and remittances. As the U.A.E. accounts for almost one-fifth of remittances, a slowdown in Dubai, following the recent financial problems, would also have adverse effects. Continued shortages of energy may further discourage private-sector investment and FDI. On the other hand, private sector investment may jump, if the global recovery is deemed more robust than expected. An acceleration of structural reforms could also boost growth substantially.

12. The staff’s updated Debt Sustainability Analysis (DSA) suggests that Bangladesh has a low risk of debt distress. Continued prudent foreign borrowing amid robust economic growth and recent real appreciation of the taka has put the external debt to GDP ratio on a declining path both in face value and in net present value terms. However, taking into account domestic public debt, which amounted to 21 percent of GDP at the end of FY09, the risk of debt distress is somewhat more elevated. In the staff’s baseline scenario, the ratio of total public debt to GDP remains at around 44 percent of GDP over the medium term.

13. Other macroeconomic vulnerabilities are also low. Stress tests conducted during the recent FSAP update suggest that the banking system is mainly vulnerable to a deterioration in domestic credit quality, whereas vulnerability to exchange or interest rate movements is low. The stock market continues to play a limited role in the overall economy. However, with the increasing engagement of banks in the market, risks to capital from a fall in the market could be large for some banks.

IV. Macroeconomic Policy Discussions

Discussions centered on policies required to maintain near-term macroeconomic stability, including by reducing excess liquidity in the financial system, and longer-term policies to boost growth through tax policy reform and higher public investment.

A. Containing Excess Liquidity

14. Through the summer, monetary policy was accommodative. The injection of liquidity from unsterilized interventions, conducted to maintain the stability of the exchange rate, pushed short-term interest rates substantially below the notional corridor of policy interest rates from April onwards and inflated banks’ excess reserves to unprecedented levels (Figure 3). In order to boost lending and activity, BB also capped banks’ interest rates on lending to priority sectors. These actions were taken against the backdrop of a declining inflation rate and a deceleration of private sector credit.

15. The subsequent tightening of monetary policy was inadequate. Faced with large excess liquidity in the banking system and a rapid rise in share prices, BB started to mop up liquidity through the issuance of BB bills (from August) and reverse repo operations (from mid-October, after having reduced the reverse repo rate by 200 basis points to 2.5 percent). However, the total amount of liquidity taken out of the market by BB remained limited.

16. The reduction in excess liquidity and reserve money was mostly achieved through high-cost government borrowing beyond what was needed to finance the fiscal deficit. Strong net sales of National Savings Certificates (NSCs) and Treasury Bills and Bonds caused an accumulation of government deposits with BB (Box 2). For instance, during October alone, BB’s net claims on government declined by Tk 40 billion. Staff noted that BB would need to start issuing a sufficiently large amount of BB bills—the authorities’ main instrument to mop up liquidity—to bring down excess liquidity further if the government began to draw on its deposits with BB. The resulting higher market interest rates would be a small price to pay to prevent a harmful acceleration of inflation. BB emphasized that it would take strong actions to bring excess liquidity down further if inflation and credit demand were to pick up. The government made clear that it stood ready to bear the (quasi-)fiscal costs of the needed mopping up operations.

17. There is scope to strengthen the monetary policy framework and stabilize systemic liquidity. To enhance the credibility and predictability of monetary policy, staff proposed to move, in due course, to a standing facility for repo and reverse repo operations and adoption of an interest rate corridor. The authorities concurred but noted that this would have to wait until fully functional open market operations are in place. Staff also noted that averaging reserve requirements on a two-week maintenance period would help control short-term volatility.

Challenges in Cash Management

Bangladesh faces challenges in cash management on both the expenditure and funding sides of the budget. This raises the government’s interest bill and could undermine fiscal control owing to the resulting build up of deposits at BB and commercial banks over which the Ministry of Finance has limited control.

  • Alongside the funds flowing through the treasury single account (TSA), Ministries and Departments retain substantial amounts of cash in commercial bank accounts (1.1 percent of GDP at the end of FY2009). There is no law or rule in place that requires unspent funds held in commercial banks to be swept back into the TSA at the end of the fiscal year. Commercial bank deposits of autonomous and semi-autonomous government bodies are also rising steadily and amounted to 1.8 percent of GDP at the end of FY2009. This suggests that budget allocations to these bodies have systematically exceeded their spending needs.

  • Unlike in most countries, retail government savings instruments (NSCs) form a large proportion of outstanding government debt in Bangladesh and now amount to 8 percent of GDP. There are no effective controls on NSC sales as they are entirely demand driven. Interest rates on NSCs are administered and have been changed only four times in the past ten years. At present, NSC interest rates vary from 8½ to 12 percent. In the current environment of low inflation and excess liquidity, rates on bank deposits and on treasury bills of similar maturity are 400–500 basis points lower. As a result, there has recently been a large shift toward NSCs: with net sales in Q1 FY2010 of Tk 28 billion, the annual net sales target of Tk 33 billion is likely to be exceeded. Moreover, despite these large NSC sales the government has mostly adhered to its treasury bill and bond auction calendar, causing a major increase in unremunerated government cash balances with BB.

B. Improving Exchange Rate Management

18. Greater exchange rate flexibility could help reduce the costs of managing liquidity for BB, while dampening inflationary pressures. Staff believes that the taka is somewhat undervalued, though not far out of line with fundamentals (Box 3). Staff expressed the view that allowing a modest nominal appreciation of the taka could help reduce excess liquidity in the financial system, thereby reducing the pressure on monetary policy. A modest appreciation would help dampen inflation and would be unlikely to affect the competitiveness of Bangladesh’s exports, especially because of the recent sharp nominal depreciation vis-à-vis the euro and the yen. Staff underscored that greater exchange rate flexibility would also be in the longer-term interest of the economy, especially if the balance of payments would remain stronger than currently envisaged. In addition to helping financial sector development (e.g. through encouraging the development of a foreign exchange derivatives market for hedging purposes), it would reduce the need for costly sterilization operations which risk exacerbating vulnerabilities related to the rising domestic debt.

19. The authorities indicated that they would not contemplate greater exchange rate flexibility. While they also felt that the taka was somewhat undervalued, they were concerned that a nominal appreciation would add to the problems of exporters.

C. Boosting Growth Through Higher Capital Spending

20. Bangladesh seems stuck in a low revenue-low capital spending equilibrium but would break into a higher growth trajectory with decisive tax reforms. Bangladesh has a track record of overall fiscal prudence. However, two key issues are preventing a sustainable rise in growth-enhancing government spending:

  • Bangladesh’s tax-to-GDP ratio (stable at around 8.5 percent for the past several years) is 4 percentage points lower than the average of countries in the region at a similar development stage, constraining the scope for higher spending in key fields.

  • Capacity constraints and governance issues are causing chronic under-implementation of the ADP. The 56 percent increase in ADP spending envisaged in the FY2010 budget over the FY09 outturn looks unrealistic given also that the implementation rate has averaged 73 percent over the past 5 years.

21. Staff outlined a reform scenario which illustrates how a higher growth trajectory can be achieved with higher capital spending (Text Table 2). However, it would require a break from the past, when recurring plans for tax policy and tax administration reforms were invariably watered down and capacity constraints and governance issues prevented increased ADP implementation. Raising tax revenue to the level envisaged in the scenario, i.e. 11.6 percent—still one percentage point of GDP below the regional average—would require fundamental changes in income tax and VAT policy.

Is the level of the REER appropriate?

While the taka appears to be somewhat undervalued, staff believes that the assessment made during last year’s Article IV consultation, that the real effective exchange rate is close to its estimated equilibrium level, remains valid.

Between 2000 and 2008, Bangladesh broadly maintained its share of global exports, owing to the strong performance of the textile and garments sector (see also Box 1). Of Bangladesh’s regional competitors, India and Vietnam managed to increase their share of global exports thanks to their more diversified production base, more business-friendly macroeconomic and structural policies, and better-quality governance (See also Chapter II in IMF Country Report No. 08/335).

Over the medium term, Bangladesh’s current account balance is projected to narrow to less than 1 percent of GDP. Import growth is projected to recover and the growth of remittances is projected to slow as the effect of a slowdown in the hiring of Bangladeshi workers will begin to be felt.

Application of four different quantitative approaches suggests that the REER and the current account balance are broadly in line with macroeconomic fundamentals (Table 1, see accompanying Selected Issues Paper for more details). Using the CGER-based trade elasticity for Bangladesh (0.11) suggests that the taka is undervalued by more than 20 percent when applying the ES and MB approaches. However, applying a Bangladesh-specific trade elasticity (0.29) suggests that the taka is undervalued by about 10 percent. The latter elasticity takes into account (i) the composition of Bangladesh's exports; (ii) incomplete pass through of changes in exchange rates and international prices to import and export prices; and (iii) Bangladesh’s price-taking behavior on international markets.

Table 1.

Estimates of overvaluation of the taka

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22. Staff emphasized that tax reforms are vital to unleash Bangladesh’s potential, while maintaining fiscal prudence and sustainability. While Bangladesh’s external debt position does not pose immediate risk, escalating foreign borrowing, especially nonconcessional loans, could weaken its external debt position. Besides, foreign donors may not be able to meet increasing borrowing demand from Bangladesh. In fact, despite the large budget support from the ADB, there may be a shortfall in net external financing in FY2010. Financing higher capital spending domestically from high-cost NSCs could quickly undermine fiscal sustainability by raising the interest bill and the overall fiscal deficit.

23. The government is committed to boosting growth through tax policy reform and higher public investment. The authorities reaffirmed their intention to submit new VAT legislation to Parliament in the context of the FY2011 budget. Raising the ADP implementation ratio has become a political priority. And the FY2010 budget included an allocation to commence Public Private Partnerships (PPPs).

Text Table 2.

Bangladesh: Key Macroeconomic Indicators under the Reform Scenario

(In percent of GDP, unles s otherwise indicated)

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Sources: Bangladesh authorities and Fund s taff estimates and projections.

D. Reforms of Energy Prices and State-Owned Enterprises (SOEs)

24. Energy and fertilizer subsidies look set to rise again. Losses of SOEs, which for the most part have been brought on the budget, arise mainly from administered prices that do not cover input costs. As a result of the rapid decline in international oil prices during FY09, losses at the state-owned oil company were contained. However, international oil prices have been rising in recent months and domestic prices for petroleum products and electricity are again below the levels needed to cover the costs of the relevant SOEs. Staff recommends that the authorities opt for early and more frequent adjustment of retail energy prices, combined with targeted compensation for the poor. This would prevent the accumulation of large losses and an eventual large price adjustment, as was experienced in FY08. Also, by reducing infrastructure bottlenecks, including oil-import facilities, the transportation and distribution costs can be substantially reduced, which would lessen the need to raise retail prices.

E. Financial Sector Reforms

25. Successful financial sector reforms are key to securing Bangladesh’s growth potential. The July 2009 FSAP Update mission found that considerable progress has been made in strengthening the soundness and resilience of the financial sector since the 2003 FSAP. Financial soundness indicators are generally favorable although the asset quality of the commercial loan portfolio remains weak, with a large share of loans classified in the substandard, doubtful, and loss categories. The recommendations of the FSAP Update mission provide a roadmap to a more efficient and resilient financial sector.

26. The weak state of the state-owned commercial banks (SCBs) remains a concern. The banking sector remains structurally weak, reflecting low capitalization and distortions due to the presence of weak and systemically important SCBs. Three large SCBs were corporatized in 2007 and brought under BB’s regulatory authority. Their Boards and management were strengthened, and their operations were upgraded through a monitorable program. The SCBs’ finances have improved but remain much worse than those of the private banks.

27. Staff underscored that strategic guidance and robust decisions—based on business principles at the Board and management level—remain critical to further promote SCBs’ soundness, especially in view of the recent relaxation of the cap on the loan portfolio growth from 5 to 10 percent. In this context, it urged BB to closely monitor the performance of the three corporatized SCBs using agreed verifiable indicators. In order to prevent an increase in non-performing loans in the medium term, BB should use its supervisory powers to take corrective measures, as necessary, if there is evidence that these banks are not being run appropriately. In particular, it would be important to monitor whether all of the recently appointed directors and chairmen live up to the expectations that they will be able to help further strengthen the SCBs. And Rupali Bank, the weakest of the four major SCBs, should be brought under the same restructuring and monitoring program as the other three SCBs as quickly as possible.

28. The authorities noted the progress they had already made in implementing many of the recommendations put forward by the FSAP update mission. Recent improvements included (i) preparing for the introduction of Basel II regulations effective January 1, 2010; (ii) raising the quality of banks’ capital; (iii) creating risk management units at all banks; (iv) strengthening BB’s in-house capacity for stress testing; and (v) requesting commercial banks to run their merchant banking business through separately formed subsidiary companies. The authorities had also requested a resident advisor to assist with strengthening BB’s banking supervision capacity.

29. Staff noted the FSAP Update mission’s recommendations to strengthen accounting practices, and to unify and broaden regulations. Weaknesses in the implementation of accounting standards by banks appear to cause an overestimation of the decline in the NPL ratio and allowed “paper” recapitalizations of some of the SCBs. Prudential and regulatory enforcement would need to be improved in order to ensure that all microcredit and non-bank financial institutions (NBFIs) are eventually brought fully within the regulatory perimeter. The authorities argued that banks are using appropriate accounting standards and NBFIs and microfinance institutions are properly regulated but acknowledged that there was scope to strengthen accounting practices and the enforcement of regulations.

30. Measures should also be taken to increase efficiency in the financial markets. Non-prudential interventions, such as ceilings on lending rates for priority sectors, moral suasion, directed lending, and easing debt service for some sectors, are counterproductive in the long run. In light of this, staff welcomes BB’s pronouncement that the ceilings on lending rates are temporary. In the staff’s view, they and other intervention instruments should be removed as soon as possible and in any case before market interest rates rise with higher inflation. The high fixed interest rates on NSCs are a burden on the budget and distort the monetary policy transmission mechanism. Increased flexibility of interest rates would make the auction process for government securities more efficient and eliminate the devolvement of securities onto the primary dealers at rates that frustrate trading. It would also facilitate the development of a more active secondary market in government paper which would help financial sector deepening and monetary policy implementation, and reduce borrowing costs.

V. Other Issues

31. Improving the quality and timeliness of economic statistics would strengthen policy making. Staff noted the efforts underway to improve trade statistics. Adoption of a Statistics Act would clarify responsibilities in the compilation of statistics and provide needed autonomy to the Bangladesh Bureau of Statistics (BBS). Other key priorities include improving and updating the source data for national account statistics, moving towards Government Financial Statistics Manual 2001 standards for fiscal statistics, and ensuring that the BBS has sufficient staff and other resources to compile statistics.

VI. Staff Appraisal

32. Bangladesh’s economy has held up remarkably well, despite the global recession. Growth has been supported by buoyant domestic activity, including in agriculture and services. Resilience in exports as well as continued strong inflows of remittances also played an important role. In addition, fiscal conservatism of the government has paid large dividends. Going forward, these trends are expected to continue and the staff’s baseline scenario projects medium-term growth at a respectable 6 percent. However, staff identified two policy issues.

33. First, preventing an increase in inflation is the immediate policy concern. By stabilizing the exchange rate of the taka in the face of strong remittance inflows, monetary policy has been too accommodative for the domestic conditions. Staff welcomes the commitment made by BB to employ all available instruments to contain inflation if and when there are clear signs of a pickup in prices. However, staff sees a need for preemptive and bold action by BB. The resulting higher market interest rates would be a small price to pay to prevent a harmful acceleration of inflation, which hurts the poor most severely.

34. Greater flexibility in the exchange rate would support monetary policy objectives. Staff is of the view that the authorities should move towards greater flexibility in the exchange rate to lessen the constraints on macroeconomic policies. The export sector should be able to sustain such a move, since staff believes that the taka is somewhat undervalued, though not far out of line with fundamentals. Increased day-to-day movements in the exchange rate would also help deepen the foreign exchange market.

35. Second, for the medium term, measures should be taken to unleash Bangladesh’s potential, while maintaining fiscal prudence and sustainability. Bangladesh seems stuck in a low revenue-low capital spending equilibrium and infrastructure bottlenecks are holding back growth. Higher growth could be achieved through higher revenue and higher capital spending. Therefore, pushing through the plans for VAT reforms is crucial.

36. Further financial deepening is needed to allow Bangladesh to achieve its growth potential. Ceilings on lending rates and other non-prudential interventions should be removed as soon as possible. Increased flexibility of interest rates, including for NSCs, would make the auction process for government paper more efficient and give impetus to an active secondary market. It would also help offset the government’s higher interest costs related to the needed monetary tightening. Restructuring of SCBs must be accelerated.

37. Continued improvement in the quality and timeliness of statistics would improve policy making. Improvements in national account statistics are particularly urgent.

38. As there is no timetable for the removal of the one remaining exchange restriction on the transferability of funds in nonresident taka accounts, staff does not recommend its approval by the Board.

39. It is recommended that the next Article IV consultation with Bangladesh take place on the standard 12-month cycle.

Figure 1.
Figure 1.

Bangladesh: Real and Fiscal Sector Indicators, FY2001–09 1/

Citation: IMF Staff Country Reports 2010, 055; 10.5089/9781451804294.002.A001

Sources: Data provided by the Bangladesh authorities; IMF, Information Notice System, International Financial Statistics; and Fund staff projections.1/ Estimates for 2008/09 central government expenditure and deficit.2/ For 07/08 excludes BPC debt operation.
Figure 2.
Figure 2.

Bangladesh: Monetary and External Sector Indicators, FY2001–09

Citation: IMF Staff Country Reports 2010, 055; 10.5089/9781451804294.002.A001

Sources: Data provided by the Bangladesh authorities; IMF, Information Notice System, International Financial Statistics; and Fund staff estimates and projections.1/ Projection for 08/09.
Figure 3.
Figure 3.

Bangladesh: Recent Developments in Money and Foreign Exchange Markets

Citation: IMF Staff Country Reports 2010, 055; 10.5089/9781451804294.002.A001

Sources: Data provided by the Bangladesh authorities; CEIC Data Company Ltd.; and Fund staff estimates.1/ The exchange market pressure (EMP) index is defined as: percentage change in the Tk/US$-exchange rate plus the change in international reserves (net of currency valuation changes) scaled by reserve money.
Table 1.

Bangladesh: Key Economic Indicators, FY2007–14 1/

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Sources: Data provided by the Bangladesh authorities; and Fund staff estimates and projections.

Fiscal year begins July 1.

Consists of other capital, net lending, food account balances, check float and discrepancy.

Includes assumption of BPC liabilities of 1.4 percent of GDP in FY08.

Table 2.

Bangladesh: Balance of Payments, FY07–14 1/

(In millions of U.S. dollars, unless otherwise indicated)

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Sources: Data provided by the Bangladesh authorities; and Fund staff estimates and projections.

Fiscal year begins July 1.

Excludes official capital grants.

Includes trade credits, long-term borrowing, short-term financing for Bangladesh Petroleum Company (BPC), commercial bank net borrowing, and errors and omissions.

Includes Asian Clearing Union balances.

Table 3.

Bangladesh: Central Government Operations, FY2007–2014 1/

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Sources: Data provided by the Bangladesh authorities; and Fund staff estimates and projections.

Fiscal year begins July 1. Cash basis unless otherwise specified.

Includes bonds (Tk 75 billion) issued to three SCBs to assume BPC's liabilities in FY08.

Includes food account surplus(-)/deficit(+) and extraordinary expenditures.

Table 4.

Bangladesh: Central Bank Balance Sheet, June 2007–June 2010

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Sources: Data provided by the Bangladesh authorities; and Fund staff estimates and projections.

Calculated from monetary data using end-of-period exchange rates.

Liabilites from banks' foreign currency clearing accounts and non-bank deposits are not included in reserves.

Table 5.

Bangladesh: Monetary Survey, June 2007–June 2010

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Sources: Data provided by the Bangladesh authorities; and Fund staff estimates and projections.