Front Matter Page
IMF Country Report No. 15/304
BANGLADESH
FIFTH AND SIXTH REVIEWS UNDER THE EXTENDED CREDIT FACILITY ARRANGEMENT—PRESS RELEASE AND STAFF REPORT
November 2015
In the context of the Bangladesh Fifth and Sixth Reviews under the Extended Credit Facility Arrangement, the following documents have been released and are included in this package:
A Press Release including a statement by the Chair of the Executive Board.
The Staff Report prepared by a staff team of the IMF for the Executive Board’s consideration on October 21, 2015, following discussions that ended on March 10, 2015, with the officials of Bangladesh on economic developments and policies underpinning the IMF arrangement under the Extended Credit Facility. Based on information available at the time of these discussions, the staff report was completed on October 5, 2015.
A Debt Sustainability Analysis prepared by the staffs of the IMF and the World Bank.
The documents listed below have been or will be separately released.
Letter of Intent sent to the IMF by the authorities of Bangladesh*
Memorandum of Economic and Financial Policies by the authorities of Bangladesh*
Poverty Reduction Strategy Paper
*Also included in Staff Report
The IMF’s transparency policy allows for the deletion of market-sensitive information and premature disclosure of the authorities’ policy intentions in published staff reports and other documents.
Copies of this report are available to the public from
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International Monetary Fund
Washington, D.C.
© 2015 International Monetary Fund
Front Matter Page
BANGLADESH
FIFTH AND SIXTH REVIEWS UNDER THE EXTENDED CREDIT FACILITY ARRANGEMENT
October 5, 2015
EXECUTIVE SUMMARY
Context. The current Extended Credit Facility (ECF) arrangement, approved in April 2012, is drawing to a close. Over its three years, macroeconomic stability has been buttressed: growth is strong, inflation has eased, the public debt-to-GDP ratio has remained stable, and foreign reserves remain adequate. Progress on revenue mobilization, however, has been weak. Political uncertainty remains a key risk to the outlook.
Program. Completion of the fifth ECF review was postponed in October 2014 as the authorities needed more time to finalize key actions for implementation of the new value added tax (VAT). With the ECF arrangement originally expiring in April 2015, the fifth and sixth (and final) reviews were combined and the arrangement was extended first to July 31 and then to October 31, 2015. All performance criteria for the combined reviews have been met, all prior actions have been completed, and macroeconomic stability has been maintained.
Policies. To consolidate the program’s achievements, policies should remain focused on safeguarding macroeconomic stability while pressing ahead with reforms to support higher and more inclusive growth. In particular, the effort to boost under-performing revenue collections to reinforce fiscal and debt sustainability should continue through the launch of the new VAT in July 2016. Other key reforms include rationalizing energy subsidies; prioritizing expenditures for critical infrastructure and better-targeted social safety net programs; improving public financial and debt management; strengthening the balance sheets of state-owned banks and avoiding forbearance on prudential financial regulations.
Staff recommendation. Staff recommends completion of the combined reviews. The authorities have consented to publication of the staff report and the Letter of Intent and attachments.
Approved By
Markus Rodlauer and Peter Allum
The review missions were held in Dhaka during September 17–30, 2014 and February 25–March 10, 2015. The missions met with the Minister of Finance, Minister of Commerce, Minister of Planning, Governor of Bangladesh Bank, other senior government officials, private sector representatives, development partners, think tanks, and academics. Discussions were also held in Washington in October 2014 and April 2015 on the margins of the IMF-World Bank Annual and Spring Meetings. The staff team comprised Rodrigo Cubero (mission chief), Souvik Gupta, Sohrab Rafiq, and Stella Kaendera (Resident Representative) (all APD); Andrew Hodge (FAD); and Lynge Nielsen (SPR). Indu Chaturvedi (OED) joined the final discussions in Dhaka for both missions. Qianqian Zhang, Shari Boyce, and May Inoue (APD) assisted in preparing this report.
Contents
GLOSSARY
CONTEXT
RECENT ECONOMIC DEVELOPMENTS, NEAR-TERM OUTLOOK, AND RISKS
POLICY DISCUSSIONS
A. Macroeconomic Policies: Preserving Stability
B. Structural Fiscal Reforms: The Challenge of Creating Fiscal Space
C. Further Strengthening the Financial Sector
D. Boosting Inclusive Growth
OTHER PROGRAM ISSUES
STAFF APPRAISAL
BOXES
1. The New FY06 Base GDP
2. Impact From Lower Global Oil Prices
3. Risk Assessment Matrix
4. The 2015 Review of Public Sector Pay in Historical and International Perspective
FIGURES
1. Selected Performance Criteria and Indicative Targets
2. Exports and Remittances
3. Real and External Sector Developments
4. Monetary and Financial Market Developments
5. Fiscal Developments
TABLES
1. Selected Macroeconomic Indicators
2. Selected Economic Indicators, FY2013–17
3. Monetary Accounts, June 2012–June 2016
4. Balance of Payments, FY2013–20
5a. Central Government Operations, FY2013–17
5b. Central Government Operations, GFSM 2001 Classification, FY2013–17
6. Financial Soundness Indicators of Scheduled Banks, 2012–15
7. External Financing Requirements and Sources, FY2013–20
8. Indicators of the Capacity to Repay the IMF, FY2014–26
9. Proposed Schedule of Disbursements and Timing of ECF Arrangement Reviews
APPENDIX
1. Letter of Intent
Attachment I. Memorandum of Economic and Financial Policies
Glossary
| ADP |
annual development program |
| BB |
Bangladesh Bank |
| BOP |
balance of payments |
| BPC |
Bangladesh Petroleum Corporation |
| CPI |
consumer price index |
| DSA |
Debt Sustainability Analysis |
| ECF |
Extended Credit Facility |
| EM |
emerging markets |
| EU |
European Union, the |
| FX |
foreign exchange |
| FY |
fiscal year |
| GDP |
gross domestic product |
| GFSM |
Government Finance Statistics Manual |
| IT |
information technology |
| LOLR |
lender of last resort |
| MEFP |
Memorandum of Economic and Financial Policies |
| NBR |
National Board of Revenue |
| NPL |
nonperforming loan |
| NSC |
national savings certificates |
| PC |
performance criterion |
| P&A |
pay and allowances |
| PMC |
project management consultancy |
| RAM |
risk assessment matrix |
| REER |
real effective exchange rate |
| ROA |
return on assets |
| SB |
structural benchmark |
| SOCB |
state-owned commercial bank |
| US |
United States, the |
| VAT |
value-added tax |
| y/y |
year-on-year |
Front Matter Page
BANGLADESH
FIFTH AND SIXTH REVIEWS UNDER THE EXTENDED CREDIT FACILITY ARRANGEMENT—DEBT SUSTAINABILITY ANALYSIS
October 5, 2015
Approved By
Markus Rodlauer and Peter Allum (IMF) and Satu Kahkonen (IDA)
Prepared by
International Monetary Fund
International Development Association
| Risk of external debt distress | Low |
| Augmented by significant risks stemming from domestic public and/or private external debt? | No |
| Risk of external debt distress | Low |
| Augmented by significant risks stemming from domestic public and/or private external debt? | No |
This debt sustainability analysis (DSA) was prepared jointly by the staffs of the IMF and IDA (World Bank Group). The results indicate that Bangladesh remains at a low risk of external public debt distress, with no significant vulnerabilities related to domestic debt or private external debt.1
Front Matter Page
Press Release No. 15/476
FOR IMMEDIATE RELEASE
October 21, 2015
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