The Executive Board of the International Monetary Fund (IMF) completed the third review of Bangladesh’s economic program under a three-year arrangement supported by the Extended Credit Facility (ECF).
The Board’s decision enables the immediate disbursement of an amount equivalent to SDR 91.423 million (about $140.4 million) to Bangladesh. This would bring total disbursements under the arrangement to SDR 365.692 million (about $561.4 million), says an IMF press release.
The three-year ECF arrangement for Bangladesh was approved by the Executive Board on April 11, 2012 (see Press Release No. 12/129) for a total amount equivalent to SDR 639.96 million (about US$982.5 million), or 120 percent of quota.
“Progress on macro-stabilization and structural reforms has been strong under Bangladesh’s policy program, supported by the Extended Credit Facility. International reserves have risen and underlying inflation is moderating. Progress has also been made in lowering subsidies, raising development spending, improving public financial and debt management, and strengthening financial supervision. However, strikes and uncertainty associated with the upcoming elections, an attendant slowdown in growth, and an expected transition in the garment sector to higher costs and upgraded labor and safety standards, pose challenges ahead. To manage them, it is important to persevere with a strong policy framework in the run-up to national elections and beyond.
“Fiscal policy should remain prudent, while providing space to raise public investment and social-related spending. Further reforms to modernize the tax system and generate additional resources for development spending over the medium term are critical, with implementation of the new value added tax a priority. Public financial management needs strengthening, focused on treasury cash management, state-owned enterprise financial reporting, and debt management practices.
“Restrained monetary policy has curbed inflationary pressures and supported reserve accumulation. The stronger external position could allow scaling back foreign exchange intervention while continuing sterilization efforts.
“Bangladesh Bank should fully utilize its enhanced supervisory powers to bolster financial stability. The program for reforms at the state-owned commercial banks should be firmly advanced, backed by recapitalization.
“Reforms to achieve sustained and inclusive growth should aim at further removing critical infrastructure bottlenecks, while streamlining the trade regime and foreign exchange regulations to improve the business climate. Advancing initiatives to strengthen labor and garment factory safety conditions is also critical, while the targeting of social safety net programs needs to be further improved.”