The Executive Board of the International Monetary Fund (IMF) today completed the second review of Bangladesh’s economic program under a three-year arrangement supported by the Extended Credit Facility (ECF). The completion of the review enables an immediate disbursement of the third installment under the ECF arrangement for an amount equivalent to SDR 91.423 million (about US$136.6 million), bringing the total amount disbursed equivalent to SDR 274.269 million (about US$409.7 million).
The Executive Board approved a three-year ECF arrangement for Bangladesh on April 11, 2012 (see Press Release No. 12/129) for a total amount equivalent to SDR 639.96 million (about US$956 million), or 120 percent of quota.
Following the Executive Board’s discussion of Bangladesh, Mr. Naoyuki Shinohara, Deputy Managing Director and Acting Chair, made the following statement:
“Bangladesh’s program under the Extended Credit Facility is broadly on track. Macroeconomic pressures have eased, with reserves rising and underlying inflation moderating, supported by restrained fiscal and monetary policies. Notwithstanding the challenging global environment, exports have picked up and remittances remain strong. However, growth is slowing and could weaken further given downside risks. It will be important to maintain sound policy anchors and keep up the reform momentum.
“Fiscal policy has remained on track, but tax collections need to be strengthened and the tax base broadened. Continued policy discipline is also needed during the pre-election period. To further expand space for development spending, subsidy costs should be further reduced while protecting subsidies targeted at the poor. Public debt management needs to be strengthened through better monitoring and transparency and by taking full advantage of concessional borrowing opportunities.
“Bangladesh Bank’s prudent monetary policy has helped bring down inflation, while rebuilding international reserves. Going forward, greater exchange rate flexibility and stepped up sterilization operations will be important to contain monetary growth.
“Structural reforms have also moved forward. Timely implementation of the new value added tax will help increase revenues and modernize the tax regime. Timely passage of the banking law amendments recently introduced in parliament will strengthen financial sector governance and keep risks in check, especially those arising from state-owned banks. Continued improvement in labor conditions in the garment sector, in coordination with international business and development partners, would be welcome.”