The Executive Board of the International Monetary Fund (IMF) today completed the fifth and sixth reviews of Bangladesh’s economic program under a three-year arrangement supported by the Extended Credit Facility (ECF). The Executive Board’s decision enables the immediate disbursement of an amount equivalent to SDR 182.845 million (about US$258.3 million) to Bangladesh, bringing total disbursements under the arrangement to SDR 639.96 million (about US$904.2 million).
The three-year ECF arrangement for Bangladesh was approved by the Executive Board on April 11, 2012 (Press Release No. 12/129) for a total amount equivalent to SDR 639.96 million (about US$904.2 million), or 120 percent of quota. The arrangement was extended first to July 31 and then to October 31, 2015.
Following the Board discussion, Mr. Mitsuhiro Furusawa, Deputy Managing Director and Acting Chair, issued the following statement:
“Prudent macroeconomic policies and structural reforms, with support from the Extended Credit Facility (ECF) arrangement, have helped steer the Bangladesh economy through domestic and global challenges in the last three and a half years. Growth has been robust, inflation has eased, foreign exchange reserves have risen to a comfortable position, and public debt has remained stable as a share of GDP. Against a challenging and uncertain global landscape and upside inflation risks, the authorities should maintain prudent fiscal and monetary policies to underpin sustained high growth, build resilience to shocks, and further reduce poverty.
“Structural reforms will also play an important role in unleashing the full potential of the economy. Many important reforms were adopted under the ECF arrangement. Key structural challenges remain, however. Bangladesh’s already low tax-to-GDP ratio declined steadily since fiscal year 2012–13. Boosting revenue is necessary to maintain fiscal sustainability and build fiscal space for public investment in critical infrastructure and stronger social safety nets. To this end, the authorities should steadfastly implement the new value-added tax (VAT) for a launch by July 2016. The new VAT will simplify tax administration and lower taxpayers’ compliance costs, and it is designed to protect the poor and small businesses.
“Further reducing inefficient and regressive energy subsidies, including by aligning domestic fuel prices with international prices, and strengthening financial management and reporting in state-owned enterprises, would also open up space to increase well-targeted social spending.
“Another important priority is to continue to strengthen the resilience of the banking sector. State-owned banks, in particular, should be reformed and guided by good corporate governance practices, supported by complete branch automation by 2016.
“To further boost inclusive growth, continued efforts are needed at removing infrastructure bottlenecks, particularly in power and transportation, improving the business climate, and ensuring better labor rights and safer working conditions.”