Press Release No. 11/466

Press Release No. 11/466
December 14, 2011

An International Monetary Fund (IMF) mission visited Dhaka during November 30–December 13, 2011 to discuss a reform program with the government of Bangladesh for possible support under the IMF’s Extended Credit Facility (ECF).¹ The mission met with the Honorable Prime Minister Sheikh Hasina, her economic and energy advisors, the Minister of Finance, Finance Secretary, Bangladesh Bank Governor, and other senior officials, as well as private sector, development partner, and civil society representatives.

Discussions centered on near-term macroeconomic policy priorities and growth-critical structural reforms, which could form the basis for a program arrangement under the ECF.

The mission noted that well-coordinated policy adjustments were needed to mitigate balance of payments, fiscal, and inflation pressures and contain macro-financial risks faced by Bangladesh. It stressed the need for forceful policy actions on both the macroeconomic and structural fronts in light of a recent weakening in the global economic environment, rapid rise in oil imports and subsidy costs, and a pronounced increase in government borrowing from the banking system.

In this context, agreement was sought on a range of measures needed to reduce external and domestic imbalances, restore macroeconomic stability, and rebuild foreign reserve buffers. Discussions focused on policy moves to engender moderate monetary and fiscal tightening, backed by greater exchange rate and interest rate flexibility. In keeping with the government’s reform plans, commitments were also sought on more deep-seated measures needed to bring lasting adjustment, mainly to tax policy and administration, public financial management, financial sector oversight, and the trade and investment regime.

A finalization of program understandings awaits further consultation among officials and with the IMF over the near term to ensure timely implementation of envisaged policy adjustments.

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¹ The Extended Credit Facility (ECF) has replaced the Poverty Reduction and Growth Facility (PRGF) as the IMF’s main tool for medium-term financial support to low-income countries by providing a higher level of access to financing, more concessional terms, enhanced flexibility in program design, and more focused streamlined conditionality. Financing under the ECF currently carries a zero interest rate, with a grace period of 5½ years, and a final maturity of 10 years. The IMF reviews the level of interest rates for all concessional facilities every two years.