The International Monetary Fund (IMF) has estimated that Bangladesh's GDP (gross domestic product) growth would be 6.25 per cent for the fiscal year (FY) 2014-15.
"With a calmer political environment economic activity is gaining momentum, and real GDP growth is expected at about 6¼ per cent in the FY '15 — July 2014-June 2015 —, supported by strong domestic demand," an IMF statement said Tuesday.
The IMF issued the statement at the conclusion of the visit of an IMF Mission, led by Rodrigo Cubero, for conducting discussions on the fifth review under a three-year Extended Credit Facility (ECF) arrangement. The ECF was approved on April 11, 2012 for a total amount of SDR 639.96 million (equivalent to about US$954 million.
The Bangladesh authorities made significant progress in consolidating macroeconomic stability under the ECF-supported programme, Mr Cubero said in his statement.
The mission head, however, said: "Despite a moderation in exports, foreign exchange reserves have continued to increase and have reached adequate levels, inflation has declined, the fiscal deficit is contained and public debt is on a downward path."
There has also been progress in structural reforms. However, the introduction of a new value added tax (VAT), a key government reform to boost fiscal space for development spending, is facing delays, said the IMF statement.
"To ensure sustained rapid growth and poverty reduction in the medium term, it is necessary to preserve macroeconomic stability and create fiscal space for critical infrastructure investment and well-targeted social spending," it said.
The persistent revenue shortfalls relative to budget expectations reinforce the importance of pressing ahead with tax reforms, it said, adding implementation of the new VAT remains the foremost priority, as it has the potential to mobilise considerable additional resources, reduce compliance costs, and boost growth.
This should be complemented by reforms to strengthen revenue administration and automate data management and reporting procedures, it mentioned.
"The mission welcomes the authorities' efforts to strengthen public debt management by focusing external borrowing on projects with high social returns; to improve public financial management, including by formalising monthly treasury cash flow forecasts; and to strengthen financial reporting by state-owned enterprises," it said.
The mission also looks forward to further decisive steps to improve the financial position of the state-owned commercial banks through enhanced supervision and corporate governance, complemented with gradual recapitalisation as required, it added.
The authorities have made good progress in improving working and safety conditions in the garment industry, said the statement.
Further strengthening the targeting and efficiency of social safety net programmes is, however, needed. Steps have also been taken to gradually liberalise foreign exchange regulations, helping to boost the investment climate. Continued progress on these fronts should contribute to promoting sustained high and inclusive growth, it mentioned.
"Preliminary understandings have been reached at the technical level on policy measures that, once endorsed by the Government and subject to approval by the IMF's Executive Board, would permit concluding the fifth review under the ECF," said the statement.
The IMF mission, during its visit from September 17 to September 30, 2014, met with the Minister of Finance, Minister of Commerce, Economic Adviser to the Prime Minister, Finance Secretary, Bangladesh Bank Governor, and other senior officials, development partners, and the private sector stakeholders.
Jahangir_fe@yahoo.com