An International Monetary Fund mission (IMF), led by Mr. Rodrigo Cubero, visited Dhaka during March 19-April 2 to conduct the fourth review under the three-year, SDR 639.96 million (US$ 985.66 Million), Extended Credit Facility (ECF) arrangement (see Press Release 12/129). The mission met with the Minister of Finance, Minister of Planning, Finance Secretary, Banking Secretary, Bangladesh Bank Governor, other senior officials, and development partners.
At the conclusion of the visit, Mr. Cubero made the following statement:
“Real GDP growth is expected to be below 6 percent for fiscal year (FY) 14 (July 2013-June 2014) as unrest and uncertainty in the run-up to the January 2014 general elections have taken a toll on the Bangladesh economy. Imports, remittances, tax collections, and credit growth have all slowed. Inflation has edged up, largely due to food supply disruptions. Exports, however, have proven resilient, helped by Bangladesh’s growing share of the global textile market. Provided political stability continues and uncertainty abates, growth should rise above 6 percent in FY15.
“Throughout the recent turbulent period, macroeconomic policies have been sound, the government’s economic program remains on track, and there has been good progress on structural reforms. As a result, the mission and the authorities have been able to reach a staff-level agreement on the quantitative targets and policies needed to complete the fourth review under the ECF arrangement. This agreement is subject to review by the management and the Executive Board of the IMF. Upon the Executive Board’s completion of this review, which is expected in May 2014, SDR 91.4 million (about US$140.5 million) would be made available to Bangladesh.
“The authorities’ program continues to be suitably focused on the following broad objectives:
Maintaining fiscal prudence. The authorities are committed to maintaining fiscal prudence in FY14 and FY15. To support this goal, the government will be taking further steps to reduce tax exemptions, strengthen tax administration, and implement the new value added tax (VAT). On the expenditure side, public spending on programs and projects with high social returns will continue to be prioritized.
Consolidating debt management. Building on recent reforms that strengthen the oversight of non-concessional debt contracting, the authorities will formulate a comprehensive debt management strategy and will develop concrete guidelines to govern the issuance of sovereign guarantees.
Strengthening the financial sector. The authorities will continue to strengthen the governance and balance sheets of the state-owned commercial banks through the strict enforcement of policies that enhance these banks’ credit risk management practices and internal controls, as well as by gradually recapitalizing these banks and digitizing financial reporting by their branches.
Promoting growth and improving labor conditions. Customs procedures and foreign exchange regulations are being streamlined to improve the business climate. In addition, the government—in coordination with development partners, the business community, labor unions, and international buyers—is taking important steps to improve the working conditions and strengthen safety standards for garment workers in Bangladesh. These will be critical to ensuring strong, sustained and inclusive growth.
“The mission wishes to thank the authorities for their excellent cooperation and warm hospitality during its stay in Dhaka.”