2018 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Bangladesh


2018 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Bangladesh

Fund Relations

(As of March 31, 2018)

Membership Status

Joined August 17, 1972; accepted the obligations under Article VIII, Sections 2, 3, and 4 on April 11, 1994.

General Resources Account

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SDR Department

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Outstanding Purchases and Loans

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Latest Financial Arrangements

(In millions of SDRs)

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Extended Credit Facility (ECF), formerly PRGF.

Projected Payments to the Fund 2

(In millions of SDRs (based on existing use of resources and present holding of SDRs))

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When a member has overdue financial obligations outstanding for more than three months, the amount of such arrears will be shown in this section.

Article IV Consultation

The previous Article IV consultation was concluded on May 26, 2017 (IMF Country Report No. 17/147).

Safeguards Assessment

  • A safeguards assessment of Bangladesh Bank (BB) was concluded in July 2011. Since then, BB has implemented a number of recommendations and strengthened audit committee oversight. BB’s autonomy continues to be undermined, as the present legal framework allows for considerable government influence over bank operations. Progress in establishing effective safeguards in key areas needs to be supported by effective oversight and continued capacity building.

Anti-Money Laundering and Combating the Financing of Terrorism

  • Bangladesh has made progress in strengthening the anti-money laundering and counter-terrorism financing. The Asia/Pacific Group on Money Laundering (APG) completed its assessment of Bangladesh’s anti-money laundering and counter-terrorist financing (AML/CFT) system. The assessment is a comprehensive review of the effectiveness of Bangladesh’s AML/CFT system and its level of compliance with the FATF Recommendations. The report was formally adopted by at the APG Annual Meeting in September 2016. Bangladesh has made significant progress since the last Mutual Evaluation Report in 2009, reflecting political commitment and leadership on AML/CFT. However, level of effectiveness across the eleven immediate outcome are more mixed. The authorities prepared an action plan to address the shortcomings.

Exchange Arrangement

  • The de jure exchange rate regime is a float. Effective January 10, 2017, the de facto exchange rate arrangement was reclassified from a stabilized to crawl-like arrangement.

  • Bangladesh is an Article VIII member and maintains one restriction subject to Fund approval under Article VIII, Section 2(a) on the convertibility and transferability of proceeds of current international transactions in nonresident taka accounts.

Resident Representative

The resident representative office was established in 1972. Mr. Ragnar Gudmundsson is the current Resident Representative since November 2017.

Bangladesh Capacity Development, April 2017–April 2018

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IMF-World Bank Collaboration

(April 2018)

1. The IMF and World Bank Group (both International Development Association (IDA) and International Finance Corporation (IFC)) work together to promote policies and critical reforms that are essential for maintaining macroeconomic and financial stability and for sustained high growth and poverty reduction in Bangladesh.

  • Until recently, the IMF’s priorities for macroeconomic policies and structural reforms were anchored by the Extended Credit Facility (ECF) arrangement, approved in April 2012 and completed in October 2015. With support from this arrangement, the authorities restored macroeconomic stability and undertook reforms in the areas of domestic revenue mobilization, notably enacting a new Value Added Tax Act in 2012; tax revenue administration; fiscal expenditure allocation, including the reduction in regressive energy subsidies and strengthening of social safety nets; public financial management, including strengthening the external debt management; banking supervision and regulation, including amending the Banking Companies Act in 2013; addressing weaknesses in the state-owned commercial banks; improving central bank operations; and liberalizing foreign exchange regulations. The priorities for macroeconomic policies and reforms going forward are identified in the main text of this report.

  • The Bank’s strategy is reflected in the Country Partnership Framework (CPF) for FY16–20, endorsed by the Bank Board in April 2016. The CPF, which is aligned with the Government’s Seventh Five Year Plan, is anchored in the Bangladesh Systematic Country Diagnostic (SCD), which was completed in 2015. The SCD identified five transformational investments needed for Bangladesh to create more and better jobs and to accelerate poverty reduction. These are in the areas of energy; inland connectivity and logistics; regional and global integration; urbanization; and adaptive delta management. In addition, the SCD identified three foundational priorities which represent important prerequisites for growth and where policy attention must be sustained: macroeconomic stability; human development; and institutions and business environment.

2. The teams note that collaboration between the IMF and the World Bank Group is strong, both at headquarters and in the field (through the IMF Resident Representative’s Office and the World Bank’s Country Office). For instance:

  • There are frequent formal and informal exchanges of information on each other’s activities and on assessments of developments, the outlook, and key policy issues.

  • The teams invite each other to participate in critical internal discussions, share key documents, and seek comments on them.

  • Staffs are also invited to relevant Board meetings.

  • The teams regularly discuss the division of labor between the two institutions, and collaborate on the Debt Sustainability Analysis (DSA).

  • The World Bank and IMF are now also in the same building in Dhaka, facilitating yet deeper collaboration.

3. The teams agree that the two institutions should remain focused on the following reform areas, and based on the following division of labor:

4. Tax policy and administration. Bangladesh has one of the lowest tax-to-GDP ratios in the world. To boost growth, higher public investment in critical infrastructure and human development is needed and for that purpose it is necessary to improve revenue generation. Under the ECF arrangement, the authorities enacted a new Value Added Tax (VAT) Act, 2012, which was to be implemented from July 2017; however, the implementation was again postponed to July 2019. Nevertheless, the postponement of the implementation of the VAT Law, 2012 does not impede National Board of Revenue (NBR) from moving from a paper-based organization to a fully automated institution. Accordingly, IDA-financed Value Added Tax (VAT) Improvement Program is being restructured to place a strong emphasis on automation and process simplification (irrespective of the legislative agenda). Automation plays a key role in decreasing tax administration and taxpayers’ costs of compliance, increasing transparency of tax administration, and fostering voluntary compliance thereby broadening the tax base.

Division of labor: The new VAT law and the VAT implementation plan continue to receive technical assistance (TA) from the IMF. A resident advisor was in place until late 2014 to help with VAT implementation. IDA is providing financial and TA support for several aspects of implementation, including designing organizational reforms, new business processes, and taxpayers’ outreach which are urgent priorities under the VAT Improvement Program (VIP). In early 2017, a joint Bank-Fund mission carried out the Tax Administration Diagnostic Assessment Tool (TADAT). Both institutions are currently providing TA to the NBR.

5. Public financial management (PFM). Sound PFM is important for maintaining fiscal discipline and improving the quality of public expenditure. The Government of Bangladesh (GoB) has undertaken a series of public financial management reform programs since the 1990s. Since 2007, the WB-administered a multi-donor funded Strengthening Public Expenditure Management Program (SPEMP) for supporting GoB PFM Vision and Medium-Term Rolling Action Plan 2007–12. Through three discrete projects, SPEMP supported improving core PFM issues in the executive branch of government, as well as strengthening public expenditure oversight functions in Parliament (Public Accounts Committee) and Auditor General. In FY 2016, the GoB approved a new PFM strategy 2016–2021. The PFM reform strategy draws on Bank-supported five policy notes (legal and regulatory framework; Integrated Budget and Accounting System (iBAS++); strengthening policy- budget link and integration of non-development and development budgets; civil servants’ pensions; and State-Owned Enterprises (SOE) financial reporting and oversight) and IMF Fiscal Affairs Department Technical Assistance Report 2015 on Strengthening the Budget Formulation Process, and other IMF analyses.

Division of labor: IDA has provided assistance through its administration of the Strengthening Public Expenditure Management Program. The SPEMP was extended for five-years until December 2021 to allow the WBG and the SPEMP Donors to support the PFM Strategy implementation as a key element of a broader engagement with the Government in this area. The Government has also requested IDA financing for the effective implementation of the PFM Strategy and a scoping mission will be soon conducted. Concurrently, IDA is also leading on public procurement reform and capacity building. It has been assisting the Government for over a decade through three consecutive credits (Public Procurement Reform Project- PPRP; PPRPII, and PPRPII Additional Financing), with the recent introduction of electronic government procurement that is rapidly expanding. Another project, Digitizing Implementation Monitoring and Public Procurement Project (DIMAPPP), has just become effective. The IMF is providing support through several TA missions on cash flow forecasting and management, on budget and accounting classification, and on the budget formulation process.

6. Debt management. There had been significant progress on strengthening debt management practices under the ECF arrangement, but more needs to be done.

Division of labor: The IMF and IDA will continue working jointly in this area, including on the DSA, with the IMF coordinating views on main macroeconomic assumptions and outlook and supporting structural reforms on debt management through Article-IV consultations, and IDA providing technical support on debt management capacity through the Public Expenditure and Revenue Analysis (PERA) work, analytical work on PFM reforms as well as a Debt Management Performance Assessment (DeMPA).

7. Monetary and exchange rate policies. The IMF takes the lead in this area. IDA is playing a complementary role through operations to strengthen payments systems at Bangladesh Bank (BB).

8. Financial sector reforms. Capital shortfall in some banks, accumulated non-performing loans (NPLs) in SOBs, and weakening corporate governance across the board have affected stability of the financial sector. Technical support from the Bank and IMF would benefit Bangladesh Bank, and the financial sector as a whole, at this time when the art of balancing stability and growth is so important. The IMF had provided TA on banking supervision, including through a resident advisor until late 2014, and on strengthening the state-owned commercial banks (SOCBs). The IMF will continue to support banking sector reforms through the Article-IV consultations. IDA will provide support to improve the regulatory and oversight capacity of BB through policy dialogue and just in time notes.

9. Energy sector reform. Over the last three years, spending on subsidies, particularly on energy, has declined as a share of GDP, through the domestic price adjustments. Electricity price adjustments will need to continue in the near term to match the increased costs of generation. The gas sector is overly dependent on the domestic gas company for aggregating gas supply, exploring for onshore gas, and regulating the gas sector. The prevailing legal framework supports strong state involvement in exploration and production. A gradual adjustment of domestic gas prices will be important. Current efforts to increase gas tariffs face strong public opposition. Reducing financial and operational inefficiencies in state-owned enterprises in the energy sector is also critical. Despite strong resistance from the worker’s union, Bangladesh Power Development Board has been able to corporatize one of its distribution utilities in the recent past with the support of strong political will. Bangladesh ranks poorly among the low-income countries in terms of availability of electricity. Reliance on expensive liquid fuel for power generation needs to be reduced which eventually would reduce the subsidy burden on the government. Proper regulations and further incentives are needed for stepping up private investment in the energy sector. Institutionalization of transparent and competitive procurement processes can send the right signal to the market and help attract qualified sponsors. Import of electricity from India, a cheaper option than running liquid fuel-based plants, has started and more interconnections with India are being planned. The long-run option of tapping into the hydropower resources of Nepal and Bhutan should be seriously considered.

Division of labor: IDA will lead on policy dialogue and investment in this area, with the IMF focused on policies to address fiscal implications.

10. Social protection. Under the ECF arrangement social spending as a share of GDP was protected. However, further improvement is needed, particularly through better targeting, and consolidation of a large number of programs. Rationalization of regressive subsidies will also help provide additional room for enhanced spending on social safety net programs.

Division of labor: IDA is leading in this area through support to the development of the National Household Database to be used for objective and transparent beneficiary selection and strengthening administrative platforms at the central and local levels for improved management and better coordination of Social Safety Nets (SSN).

11. Trade and investment climate reform. To boost productivity and investment, it is vital to create a level playing field for all sectors and reduce the cost of doing business.

Division of labor: Two WBG Global Practices, Finance, Competitiveness, and Innovation (FCI) and the Macroeconomics, Trade, Investment (MTI), both joint IDA-IFC Units, are targeting trade and investment reforms through a holistic approach. As part of integrated solution, IDA is providing investment financing (including pipeline) while IFC provides complementary advisory services in areas of business environment reforms, special economic zones, transport logistics, and trade and sectoral competitiveness for export diversification. Both these units will provide implementation support to address institutional and policy reforms (including those addressed in the Diagnostic Trade Integration Study and Doing Business analytics) to improve the investment climate, and boost trade and sectoral competitiveness. The IMF provided support in reviewing the foreign exchange regulations.

12. Statistical policy. Division of labor: IDA is working on poverty, social, development statistics, and statistical infrastructure including IT needs and the IMF on macroeconomic and financial statistics. IDA is currently in the approval phase of a new investment loan to support the implementation of key elements of the National Strategy for Development of Statistics (NSDS). The objective of the investment loan is to improve the capacity of the Bangladesh Bureau of Statistics (BBS) to produce quality core statistics and make them accessible in a timely manner to policy makers and the public. The project will focus on (a) improving data collection and quality of data in several areas, including gender disaggregation where appropriate and (b) strengthening capacity of the BBS for better management and dissemination of improved statistics. The proposed project will build on progress made thus far in some reform areas of the NSDS while complementing investments by the GOB and other development partners.

13. Other structural policies. The World Bank keeps the IMF informed about its work on governance and anti-corruption, local government and decentralization, and private sector development. Upstream sharing allows the IMF to comment on such work before it is finalized.

14. The teams agree to continue to keep each other informed of their respective activities, coordinate financial and technical support, and share key documents.

Relations with the Asian Development Bank1

(March 2018)

Lending and Technical Assistance Operations

1. Bangladesh had cumulative public sector borrowing from the Asian Development Bank (ADB) of US$19.4 billion (260 loans) as of December 31, 2017, and technical assistance (TA) grants of US$258.4 million (432 projects). The country has been one of the largest borrowers of concessional resources. The loans and TA have supported all key sectors, including energy and transport, social infrastructure, and agriculture and natural resources.

2. In 2017, the ADB approved a total amount of US$1.4 billion in sovereign loans. This included loans for (i) Power System Enhancement and Efficiency Improvement Project (US$616 million of which US$16 million is from concessional ordinary capital resources loans (COL)); (ii) Third Public Private Infrastructure Development Facility (Tranche 1) (US$260 million of which US$10 million is from COL); (iii) Third Urban Governance and Infrastructure Improvement Project (Additional Financing) (US$200 million of which US$100 million is from COL); and (iv) South Asia Subregional Economic Cooperation Dhaka-Northwest Corridor Road, Phase 2 (Tranche 1) (US$300 million of which US$50 million is from COL).

3. The ADB has also supported 14 private sector projects worth US$1,005 million as of December 31, 2017. A US$253 million loan and US$330 million political risk guarantee were approved in 2017 for the construction and operation of a 718 MW combined cycle gas-fired power plant in Meghnaghat and an offshore LNG import terminal. The project represents phase 1 of the Reliance Bangladesh Liquified Natural Gas (LNG) and Power Project, providing a total of 3,000 MW of power generation capacity.

Country Partnership Strategy

4. The Country Partnership Strategy (CPS) 2016–2020, approved on September 28, 2016, focuses on the following priority investments for projects and programs: (i) easing infrastructure constraints in key sectors such as energy, transport and urban development; (ii) improving human capital through better education and skills development; (iii) promoting economic corridor development; (iv) improving rural livelihoods; and (v) providing climate and disaster resilient infrastructure and services. The CPS is closely aligned with the government’s Seventh Five-Year Plan (FY2016-FY2020) priorities and aims to contribute to faster, inclusive and environmentally sustainable economic growth. Under the CPS, ADB aims for lending totaling US$8 billion for the period of 2016–2020, including non-sovereign lending. ADB’s market-based financing from its ordinary capital resources would be used for major revenue-generating infrastructure projects. An average of US$4.3 million per annum and above in TA resources was included. In addition, TA loans and project design advances under the lending programs will support project and program preparation and advance their readiness.

5. The CPS prioritizes the drivers of change—higher private sector participation, addressing institutional capacity constraints and improving governance, deepening regional cooperation and integration and promoting gender equality. The CPS will combine financial support with knowledge. The CPS is operationalized through the Country Operations Business Plans (COBPs). The COBP 2018–2020 was approved in August 2017.

6. Over a five-year cumulative period from 2013–2017, Bangladesh leveraged US$3.8 billion of cofinancing. By the end of 2017, cumulative direct value-added official cofinancing for Bangladesh amounted to US$8.2 billion for 61 investment projects and US$85.7 million for 108 technical assistance projects. In 2017, five projects received cofinancing: (i) from Japan International Cooperation Agency for South Asia Subregional Economic Cooperation Road Connectivity-Additional Financing (US$279.27 million); (ii) from Japan International Cooperation Agency for South Asia Subregional Economic Cooperation Dhaka-Northwest Corridor Road Project, Phase 2-Tranche 1 (US$242.52 million); (iii) from Export Import Bank of Korea for South Asia Subregional Economic Cooperation Chittagong-Cox’s Bazar Railway Project, Phase 1-Tranche 1 (US$99.04 million); (iv) from Export Import Bank of Korea for Secondary Education Sector Investment Program-Tranche 2-Additional Cofinancing (US$76.02 million); and (v) from Japan Fund for Poverty Reduction for Bangladesh Power System Enhancement and Efficiency Improvement Project (US$2 million).

Economic and Sector Work Program

7. Each year, the ADB publishes its Asian Development Outlook and Asian Development Outlook Update, in which it assesses macroeconomic performance. The ADB’s Bangladesh Resident Mission (BRM) also prepares a bimonthly Economic Indicators Update. In addition, BRM commissions studies on economic and thematic areas, relevant to the country’s development issues. In 2017, ADB completed a study titled Southwest Bangladesh Economic Corridor Comprehensive Development Plan, which discusses the imperatives for economic corridor development in Bangladesh and provides future areas of focus to ensure a holistic development strategy for the country’s southwest region. The Comprehensive Development Plan is a strategic document that outlines broad categories of industries that are candidates to be promoted, infrastructure that needs to be developed, and the necessary institutional frameworks, policies and regulations.

Statistical Issues

(April 2018)

Assessment of Data Adequacy for Surveillance

1. General. Data provision has some shortcomings, but is broadly adequate for surveillance. The most affected areas are national accounts, fiscal, and external sector statistics.

2. National Accounts. Bangladesh’s annual GDP time series has a base year of 2005/06 based on a benchmark compiled and published by the Bangladesh Bureau of Statistics (BBS) in 2013. Two shortcomings include: (a) value added of residential dwelling construction is dependent upon data collected in a 1980/81 survey; and (b) the absence of a comprehensive producer price index reduces the quality of estimates of price change used to compile industry value added. A revision of the entire GDP time series based on the new 2015/16 benchmark is expected to be published in financial year 2019/20. Final annual GDP estimates are now published four, rather than ten, months after the reference period. The BBS has been provided with technical assistance to use value-added tax data to compile quarterly estimates of GDP and construct a statistical business register.

3. Price Statistics. A new CPI series with base year 2005/06 was introduced in July 2012 and improved coverage. However, data users such as Bangladesh Bank have raised concern about the reliability of the CPI data. The CPI series is currently undergoing further improvements, including incorporating the recent household survey and Classification of Individual Consumption According to Purpose (COICOP). The IMF provided technical assistance TA in these areas. The producer price index has an outdated base year (1988/89) and requires urgent attention.

4. Government Finance Statistics. The Ministry of Finance (MoF) is currently revising the Budget and Accounting Classification System (BACS) to follow the latest international standard (GFSM 2014) and integrate the accounting and reporting systems for the budgetary central government. The new BACS is expected to be incorporated into the FY18 Budget. Bangladesh currently reports budgetary central government flow data, including COFOG data, for the GFS yearbook. No stock data is reported. The coverage of extrabudgetary and local government units outside central government is inadequate and is an area for future attention. The Bangladesh Bank (BB) provides data to the World Bank-IMF Quarterly Public Sector Debt Statistics database.

5. Monetary and Financial Statistics. BB compiles monetary data using the standardized report forms (SRFs) framework. The SRFs are reported electronically to the IMF on a regular basis. As a result, a consistent time series based on SRF data is available from December 2001. A survey of Other Financial Corporations (OFCs) is not yet available.

6. Financial Soundness Indicators. Bangladesh reports all 12 core and 9 encouraged Financial Soundness Indicators (FSIs) for deposit takers and two FSIs for real estate markets for posting on the FSI website. However, FSIs are reported with semi-annual frequency and long lag.

7. External Sector Statistics (ESS). A quarterly BPM6 compliant time series covering the period 2005 to 2017 inclusive for balance of payments and international investment position; a biannual time series covering the period June 2014-June 2017 for the IMF’s coordinated portfolio investment survey; an annual time series until 2016 inclusive for the IMF’s coordinated direct investment survey; and a quarterly time series until 2017 Q3 for external debt statistics have been published by BB and reflect improved coverage of indicators, as well as of periodicity and dissemination. These were possible with TA support from the Japan Subaccount Project on the Improvement of ESS in the Asia and Pacific region. Despite the important progress made, steps remain to be taken by the BB to further improve the quality of ESS and ensure the continuous timely compilation and dissemination of Bangladesh’s ESS. To assist the authorities in continuing developing Bangladesh’s capacity development, they will receive TA under the new South Asia Regional Training and Technical Assistance Center (SARTTAC) ESS follow-up project.

8. Data Standards and Quality. Bangladesh participated in the General Data Dissemination System (GDDS) in March 2001, which was superseded by the enhanced GDDS (e-GDDS) in 2015 with a focus on data dissemination to support transparency and surveillance. In implementing the e-GDDS, Bangladesh began publishing in October 2017 a set of macroeconomic data in both human-and machine-readable (SDMX) formats. This marks a major milestone in Bangladesh’s statistical development and facilitates the authorities’ efforts to achieve their goal of subscribing to the Special Data Dissemination Standard, a higher tier of the IMF’s data dissemination standards.

Bangladesh: Table of Common Indicators Required for Surveillance

(As of April 24, 2018)

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Daily (D); weekly (W); monthly (M); quarterly (Q); annually (A); irregular (I); not available (NA).

Includes reserve assets pledged or otherwise encumbered as well as net derivative positions.

Both market-based and officially determined, including discount rates, money market rates, and rates on treasury bills, notes, and bonds.

Foreign, domestic bank, and domestic nonbank financing.

The general government consists of the central government (budgetary funds, extra-budgetary funds, and social security funds) and state and local governments. Data for the general government are currently not being compiled due to capacity limitations.

Currency and/or maturity composition may not be available for the most recent data.

Includes external gross financial asset and liability positions vis-à-vis nonresidents.


Bangladesh joined the Asian Development Bank in 1973.