DHAKA: International Monetary Fund (IMF) approved an ‘immediate disbursement’ of US$140.9 million to Bangladesh on Thursday.
The approval came after IMF Executive Board completed the fourth review of Bangladesh’s economic program under a three-year arrangement supported by the Extended Credit Facility (ECF), according to the press release posted on IMF’s website.
This approval would bring a total disbursement of $704.3 million under the arrangement to SDR 457.115 million.
The three-year ECF arrangement for Bangladesh was approved by the Executive Board on April 11, 2012 for a total amount equivalent to about US$986 million, or 120 percent of quota.
Bangladesh has made further progress in strengthening macroeconomic stability under the ECF-supported program.
While economic activity was affected by unrest and uncertainty in the run-up to the January 2014 general elections, international reserves have continued to increase, the ratio of public debt to GDP is on a downward path, and underlying inflation has been easing.
All performance criteria under the ECF arrangement for end-December 2013 were met. There has also been progress on structural reforms, and all structural benchmarks for this review were completed.
Looking ahead, with greater calm after the elections, domestic demand is expected to recover, and real GDP growth is projected to increase to 6¼ percent in Fiscal Year (FY)15 (July 2014 – June 2015).
The main risk for growth would be a resurgence of unrest. Inflation is expected to decline in FY15 on continued policy restraint, though higher wages and adjustments in administered prices pose upside risks.
The current account of the balance of payments is projected at a surplus of 1.3 percent of GDP in FY14, and is expected to move into a moderate deficit in FY15.
Macroeconomic policies under the authorities’ program are set to remain focused on safeguarding stability and building policy buffers. With inflation risks tilted to the upside in the near term, monetary policy should remain prudent.
Fiscal policy will be anchored on a continued gradual reduction of the public debt-to-GDP ratio, while allowing for increased public investment and social spending. Continued fiscal prudence will also help provide greater room for credit growth to finance a recovery in private investment.
Bangladesh has one of the lowest tax-to-GDP ratios in the world, and it is critical to strengthen revenues so as to broaden fiscal space for priority development spending, while resisting pressures to provide further tax benefits, the release added.
Implementation of the new VAT remains the foremost priority, complemented by reforms to strengthen revenue administration.
The program also embodies reforms to improve public financial management, including by formalizing monthly treasury cash flow forecasts, strengthening financial reporting by state-owned enterprises, and tightening debt management procedures.
BDST: 1324 HRS MAY 30, 2014
