IMF Executive Board Concludes 2015 Article IV Consultation with Bangladesh

Press Release No. 16/34
February 1, 2016

On January 20, 2016, the Executive Board of the International Monetary Fund (IMF) concluded the 2015 Article IV consultation with Bangladesh.1

Despite global headwinds and episodes of domestic unrest, Bangladesh has had a strong macroeconomic performance in the two years since the last Article IV consultation, supported by prudent policies under the recently-completed Extended Credit Facility (ECF) arrangement with the IMF.

Real GDP growth has remained above 6 percent, a notable performance in the current global context. Headline inflation has eased, international reserves have risen further, and the public debt-to-GDP ratio has remained largely stable at a moderate level. However, tax revenue performance has been weak, with revenues increasing more slowly than GDP. Also, private domestic demand, particularly private investment, has been subdued, partly contributing to a slowdown in credit to the private sector. Various economic activity indicators suggest a slower-than-expected start to the current fiscal year (FY16, July 2015–June 2016).

Provided calm prevails, prudent policies remain in place, and structural reforms are implemented as envisaged, the medium-term economic outlook should be positive and marked by continued stability and high growth. In FY16, real GDP growth is projected at 6.3 percent, supported by higher public sector wages and public investment. Growth is projected to accelerate gradually to 7 percent over the medium term, as public investment is further ramped up and constraints on investment ease, with private investment also supporting a recovery in private sector credit. Headline inflation is forecast to remain broadly stable in FY16 and edge up slightly next fiscal year owing to temporary effects from higher public sector wages and the introduction of the new VAT. Against investment-led growth, the current account balance is projected to remain in a moderate deficit, averaging 1.5 percent of GDP, while international reserves should continue to rise.

Executive Board Assessment2

Executive Directors commended the Bangladesh authorities for the strong macroeconomic performance over the past few years, including under the recently completed Extended Credit Facility arrangement. Growth has been robust, external reserves have risen, inflation has abated, the public debt-to-GDP ratio has remained stable at a moderate level, and social indicators have improved. Directors noted that the outlook is broadly positive, provided the authorities continue to implement prudent policies and structural reforms to create fiscal space for development needs, strengthen the banking system, enhance resilience against shocks, including from climate change, and promote diversification and inclusion.

With inflation risks tilted to the upside, Directors recommended continued vigilance and prudent adjustment of reserve money growth. They also encouraged the authorities to continue sterilized foreign exchange intervention and to consider adopting a basket of trading partners’ currencies to guide foreign exchange intervention policy going forward.

Directors agreed that mobilizing domestic revenue should be a foremost policy priority to create fiscal space for increasing public investment in critical infrastructure and strengthening social safety nets, while keeping the debt-to-GDP ratio broadly stable. To achieve these goals, Directors called for timely implementation of the new VAT supported by an effective communication strategy. They also emphasized the importance of continued efforts to strengthen tax administration, particularly through automation, and reforms to expand income tax bases.

Directors stressed the need to improve budget formulation and execution, and to strengthen the selection of public investment projects by subjecting them to strict cost-benefit analysis, particularly projects financed by nonconcessional external borrowing. They also encouraged the authorities to improve public financial reporting and management at state-owned enterprises, and to move toward a market-based fuel price regime.

To boost private sector credit, and thereby further promote investment and growth, Directors called on the authorities to press ahead with reforms to strengthen banking sector supervision, and avoid regulatory forbearance. They also encouraged continued progress in improving corporate governance, credit policies and asset quality at state-owned banks, and aligning the national savings certificates interest rates with market rates.

Directors commended the authorities’ efforts to promote financial inclusion. They called for wide-ranging reforms to improve public infrastructure and the investment climate, and to diversify exports. Directors welcomed the priority that the authorities are giving to adapting to climate change, and looked forward to sustained efforts in this area, including through improved coordination and oversight of climate change-related spending.

Bangladesh: Selected Economic Indicators, FY2013–17 1/
I. Social and Demographic Indicators

Population (FY14, millions; estimate)


Infant mortality (2013, per thousand live births)


GDP per capita (FY14, U.S. dollars)


Life expectancy at birth (2012, years)


Labor force participation rate (FY10, percent; national measure)


Adult literacy (2012, percent of people)


Poverty headcount ratio (2010, national measure, percent)


Population dependency ratio (2013, percent)


Gini index (World Bank estimate)


Population growth (FY14, y/y, percent; estimate)

II. Macroeconomic Indicators
    FY14 FY15   FY16 FY17
      Prel./Staff est.  

Staff proj.


National income and prices (annual percent change)

  • Real GDP

6.0 6.1 6.5   6.3 6.8
  • GDP deflator

7.2 5.7 5.8   6.8 7.4
  • CPI inflation (annual average)

6.8 7.3 6.4   6.5 7.0
  • CPI inflation (end of period)

8.1 7.0 6.2   6.7 7.3
  • Nonfood CPI inflation (end of period)

7.7 5.4 6.2   6.8 7.7

Central government operations (percent of GDP)

  • Total revenue and grants

11.2 10.9 9.9   10.5 11.6
  • Total revenue

10.7 10.4 9.6   10.3 11.3
  • Tax

9.0 8.6 8.5   8.7 9.6
  • Nontax

1.8 1.8 1.1   1.5 1.7
  • Grants

0.5 0.5 0.3   0.3 0.3
  • Total expenditure

14.6 14.0 13.8   14.9 15.8
  • Current expenditure

8.3 8.2 7.9   8.9 9.5
  • Annual Development Program (ADP)

4.2 4.1 4.3   4.8 5.2
  • Other expenditures 2/

2.1 1.7 1.7   1.2 1.2
  • Overall balance (including grants)

-3.4 -3.1 -3.9   -4.4 -4.3
  • (Excluding grants)

-3.9 -3.5 -4.2   -4.7 -4.6
  • Primary balance (excluding grants)

-1.9 -1.5 -2.1   -2.6 -2.3

Total central government debt (percent of GDP)

34.5 33.9 34.0   34.3 34.2

Money and credit (end of fiscal year; percent change)

  • Credit to private sector by the banking system

10.8 12.3 13.2   14.7 15.9
  • Reserve money 3/

15.0 15.4 14.3   13.5 14.7
  • Broad money (M2)

16.7 16.1 12.4   13.5 14.7

Balance of payments (billions of U.S. dollars)

  • Exports, f.o.b.

26.6 29.8 30.8   32.6 35.7
  • (Annual percent change)

10.7 12.1 3.3   6.0 9.5
  • Imports, f.o.b.

-33.6 -36.6 -40.7   -43.3 -47.2
  • (Annual percent change)

0.8 8.9 11.2   6.3 9.2
  • Current account balance 4/

2.4 1.4 -1.6   -2.7 -3.4
  • (Percent of GDP)

1.6 0.8 -0.8   -1.3 -1.4
  • Capital and financial account balance

3.5 3.4 5.6   4.7 5.4
  • Of which: Foreign direct investment

1.7 1.4 1.7   1.9 2.4
  • Overall balance

5.1 5.5 4.4   2.0 2.0

Gross official reserves (billions of U.S. dollars) 5/

15.1 21.4 24.9   27.2 29.2
  • In months of prospective imports of goods and services

4.1 5.3 5.8   5.8 5.7

Exchange rate (taka per U.S. dollar; period average)

79.9 77.6 77.7  

Exchange rate (taka per U.S. dollar; end-period)

77.8 77.6 77.8  
  • Nominal effective rate (2010=100; period average)

86.9 89.7 95.4  

Real effective rate (2010=100; period average)

99.3 107.8 120.5  

Memorandum item:

  • Nominal GDP (billions of taka)

11,989 13,437 15,136   17,180 19,704

Sources: Bangladesh authorities; World Bank, World Development Indicators; and IMF staff estimates and projections.

1/ Fiscal year begins July 1.



2/ Includes non-ADP capital spending, net lending, food account surplus (-)/deficit (+), and extraordinary expenditures.

3/ Reserve money excludes liabilities arising from banks' foreign currency clearing accounts at Bangladesh Bank (BB) and nonbank deposits at BB.

4/ Imports are based on customs data.


5/ Excludes deposits held in offshore accounts of resident financial institutions, noninvestment grade sovereign bonds, and foreign exchange

overdrafts provided by BB to domestic banks.


1 Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. In the presence of an IMF arrangement, such as the Extended Credit Facility arrangement that Bangladesh had with the IMF between April 2012 and October 2015, Article IV consultations take place every two years. As part of the consultation, a staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.

2 At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summings up can be found here:


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