Abstract
Fiscal performance has been broadly in line with program targets. As a result, the current account deficit has narrowed, reserves have increased significantly, and headline inflation is under control. However, implementation of structural benchmarks has lagged, necessitating sharper focus and greater ownership by the authorities. The global economic slowdown coupled with election-year uncertainty in Bangladesh poses the most immediate challenge to policymakers. The balance of risks is to the downside in the near term, potentially putting pressure on growth and inflation and undermining financial stability.
Statement by the Staff Representative on Bangladesh Executive Board Meeting February 20, 2013
The information below has become available following the issuance of the staff report and the staff statement. It does not alter the thrust of the staff appraisal.
1. In addition to the loans contracted by the authorities described in the staff report, the nonobservance of the continuous performance criterion (PC) on nonconcessional external debt maturing in more than one year was also caused by the issuance of a guarantee in the amount of US$193 million in January 2013 for external borrowing by a public sector entity for a combined cycle power plant. The guarantee was included in the baseline scenario of the joint IMF-World Bank Debt Sustainability Update prepared for the current review. The authorities are taking remedial steps to strengthen their debt management practices and the rules governing the granting of guarantees as specified in the Letter of Intent and Memorandum of Economic and Financial Policies (¶15). Given these corrective actions, staff continue to support the authorities’ request for a waiver of the continuous PC.