IMF to attach top priority to NBR reforms during talks

FE Team | Published: September 05, 2007 00:00:00 | Updated: February 01, 2018 00:00:00

Shakhawat Hossain
The International Monetary Fund (IMF) will attach top priority to reforms in the National Board of Revenue (NBR) during talks about a fresh deal on its role in advancement of Bangladesh's economy.
An IMF team arrived in Dhaka Tuesday on a fortnight-long mission to discuss with the government officials about striking a deal on a successor to the Poverty Reduction Growth Facility (PRGF) agreement that expired in June last.
The Washington-based multilateral donor agency offered US$ 467.4 million under the PRGF over a period of three years that primarily aimed at supporting the country's balance of payment.
Earlier, the IMF indicated in a letter to the finance and planning adviser Mirza Azizul Islam that the thrust of reforms in the NBR should be to separate tax policy from administration.
It said the separation issue is linked to improvement in revenue generation.
The latter said: "Fundamentally, improving the revenue system will need to be the cornerstone of any PRGF-supported arrangement with the IMF."
The IMF has already expressed its unwillingness to continue with the PRGF agreement. It wants to replace the PRGF with an arrangement which will largely make the IMF a facilitator for foreign assistance to Bangladesh.
Under the new deal the IMF will periodically review Bangladesh's economy to send signals to overseas donors for the country's aid requirement, sources said.
They said the possible successor to the PRGF is the Policy Support Instrument (PSI), which was introduced in October 2005, enabling the IMF to support low-income countries that do not want or need financial assistance.
The IMF mission, led by its Asia Pacific adviser Thomas Rumbough, is expected to prepare a report and place it before the IMF executive board for approval.
The executive board will settle the issue of the PRGF successor, sources added.
The IMF has already expressed dissatisfaction over the government indecisive role on separation of tax policy from administration in NBR.
"While we welcome the indication that formulation of new tax laws and separation of tax policy from administration are under consideration, we are disappointed that you have not yet decided to implement these reforms," said the letter.
Sources said the Ministry of Finance (MoF) at a meeting nearly a couple of months ago agreed in principle to go for separation of tax policy from administration.
The meeting also decided to form a committee to examine technical process of such separation and other issues. The proposed committee is yet to be formed, the sources added
Comprehensive reform in NBR has become imperative to increase revenue collection for improving the country's tax and gross domestic product (GDP) ratio.
The country's international donors have long been suggesting improvement in the tax-GDP ratio, which is the lowest in South Asia.
According to a MoF study, there was no tax revenue growth, in real terms, during the last couple of fiscal years.
Until 2004-05 fiscal, the annual tax revenue growth was rather satisfactory.
But from the fiscal 2005-06 the situation deteriorated. The tax revenue growth for fiscal 2006-07 was recorded at 0.2 per cent in terms of tax- GDP ratio. But the growth rate should be 0.4 per cent.
The NBR managed, on an average, an 11 per cent annual growth of revenue in the years between 2000 and 2004. But in the last fiscal, the board achieved less than 9.0 per cent per cent growth although it should have achieved almost 21 per cent growth.