IMF projects 6.25pc GDP growth in FY \\\'15

FE Team | Published: May 31, 2014 00:00:00 | Updated: November 30, 2026 06:01:00

FE Report
The International Monetary Fund (IMF) has projected a 6.25 per cent Gross Domestic Product (GDP) growth for the next fiscal 2014-15 recovering from the impact of the ongoing lower consumer demand.
"Looking ahead, with greater calm after the elections, domestic demand is expected to recover, and real GDP growth is projected to increase to 6¼ per cent in Fiscal Year (FY)15 (July 2014 - June 2015)," the IMF in a statement said Friday.
The government is likely to set the GDP growth target at 7.3 per cent for the next fiscal.
The global financial institution said the main risk for the economic growth would be a resurgence of political unrest.
After the fourth review of the Extended Credit Facility (ECF) programme in Bangladesh, the IMF has decided to release US$140.9 million credit, fifth trance of its total $986 million loan pledged in 2012, very soon.
The Executive Board of the IMF has decided to disburse the fund. This would bring total disbursements under the ECF arrangement to about US$704.3 million. The decision was taken without a formal Board meeting.
The three-year ECF arrangement for Bangladesh was approved by the Executive Board on April 11, 2012 for a total amount equivalent to SDR 639.96 million (about US$986 million), or 120 per cent of quota.
About the macro-economy, the IMF in its statement Friday said Bangladesh's inflation is expected to decline in FY15 on continued policy restraint, though higher wages and adjustments in administered prices pose upside risks.
The global financial institution, however, said the current account of the balance of payments is projected at a surplus of 1.3 per cent of GDP in current FY14 which is expected to move into a moderate deficit in FY15.
The IMF review said Bangladesh has made further progress in strengthening macroeconomic stability under the ECF-supported programme.
"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," the IMF said.
The global financial institution suggested that with inflation risks tilted to the upside in the near term, the 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," it observed.
The IMF review said 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.
Implementation of the new VAT remains the foremost priority, complemented by reforms to strengthen revenue administration, it said.
The programme also embodies reforms to improve public financial management, including by formalising monthly treasury cash-flow forecasts, strengthening financial reporting by state-owned enterprises, and tightening debt management procedures.
The IMF said: "The Bangladesh Bank is expected to continue strengthening financial supervision, while avoiding regulatory forbearance. Its steps to tighten regulations on related lending and closely monitor banks' stock market exposures are welcome."
Strengthening the state-owned commercial banks remains another focus of financial reforms, centered on improving governance, automating financial reporting, and recapitalising these banks, it said.
"The authorities are moving ahead with their plan for gradual liberalisation of foreign exchange regulations, complemented by a streamlining of trade tariffs and regulations. Steps have also been taken to improve working conditions in the garment industry, including through a sizeable increase in the minimum wage, and to strengthen the targeting and efficiency of social safety net programs. Continued progress on these fronts should contribute to promoting high, sustained, and inclusive growth," IMF review said.