## _cr08138 - Executive Summary

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---

### Background
- A devastating cyclone struck the coast of Bangladesh on November 15, 2007 shortly after severe flooding between July and September 2007.
- Human and physical toll:
  - At least 4,400 deaths from the cyclone; floods killed over a thousand people.
  - Almost 9 million people disrupted by the cyclone; floods displaced 1.0 million elsewhere in the region.
  - Damage from floods and cyclone estimated at $2.7 billion (3.7 percent of GDP).
  - Flood damage estimated at $1.1 billion (1.5 percent of GDP); cyclone damage estimated at $1.6 billion (2.2 percent of GDP).
- Relief and reconstruction costs for FY08:
  - Total program cost estimated at $850 million.
  - Approximately $450 million in funding secured from development partners, including about $220 million in grants (commodity aid and NGO assistance) outside central government budget, and $225 million in additional budget support from the World Bank and the AsDB.
  - Direct central government budgetary cost about $450 million, to be financed by additional budget support, improved revenue collections, and budgetary reallocations.
- Authorities requested a purchase of SDR 133.3 million (25 percent of quota) under the Fund’s policy on emergency assistance for natural disasters; staff supports the request.

### Economic developments preceding the disasters
- Growth and inflation:
  - Growth forecast revised from an estimated 6¼ percent in FY07 to about 6 percent for FY08 prior to disasters.
  - Consumer price inflation: 6 percent half a year earlier; 9 percent (year-on-year) in June 2007.
- Fiscal and SOE situation:
  - Central government budget deficit considered on track; ADP implementation rate in early FY08 the lowest in a decade.
  - FY08 budget assumed debt equivalent to 1.4 percent of GDP from the state-owned petroleum company (BPC) for past losses; without further energy price adjustments, new SOE losses could reach 1–1½ percent of GDP in FY08.
- External position:
  - Debt sustainability analysis found low levels of external debt but moderate risk of debt distress overall because of domestic debt.
  - Remittances growing in excess of 20 percent.
  - Import coverage of official reserves on pace to fall to 3.1 months in FY08, compared to 3.3 months in FY07, even without disasters.
- Monetary indicators (pre-disasters):
  - Reserve money growth declined from 34 percent in December 2006 to 16 percent by June 2007.
  - Broad money growth and private credit growth declined by about 5 percentage points to 17 percent and 15 percent, respectively.
- Structural reforms and institutional changes:
  - New container terminal at Chittagong port placed under private management; turnaround time for ships reduced from 8.7 days in March to 2.8 days in January.
  - Tax administration reforms: separation of tax administration and tax policy responsibilities; merge of Large Taxpayer Units; unique taxpayer identification numbers; self assessment system increased individual taxpayer submissions threefold.
  - Governance improvements: separation of judiciary from executive; strengthened Anti-Corruption Commission.
  - More gradual approach to privatization of state-owned commercial banks; energy price adjustment pending.

### Impact and policy response
- Output and inflation impacts:
  - More than 2.4 million acres of cropland reported damaged; almost one-quarter of the November crop ready to harvest lost; most shrimp farms in cyclone-affected areas destroyed.
  - Staff projects growth reduced by ¾ of a percentage point to 5–5½ percent.
  - Inflation: increased by a further 2½ percentage points since September to 11½ percent in January (year-on-year); food price increases of 14 percent.
  - Inflation expected to moderate only slightly to 10 percent by end-FY08 given prevailing high international prices.
- Authorities’ disaster response measures:
  - Distribute to vulnerable groups at subsidized prices about 500,000 metric tons of rice imported by the government; total import need estimated at 1.25 million metric tons with much imported by the private sector.
  - Distribute seeds, fertilizer, and insecticides to disaster-affected farmers.
  - Provide benefits for disaster-related deaths and injuries, cash transfers to repair and rebuild homes, and low-interest loans to fishermen and farmers.
  - Begin repairing and reconstructing roads, bridges, coastal embankments, and the electricity distribution network.
- Fiscal impact and financing:
  - Fiscal cost of the disaster program for FY08 estimated at Tk 31 billion ($450 million; 0.6 percent of GDP), of which Tk 18 billion for social assistance programs (including subsidized food and fertilizer) and the remainder for capital spending.
  - Tax revenue collected by the National Board of Revenue rose by 25 percent in the fiscal year to January, led by income taxes and VAT; FY08 budget assumed revenue growth of 17 percent and this target could be exceeded by 0.3 percentage points of GDP.
  - Disaster-related donor assistance amounts to 0.3 percent of GDP; net domestic financing expected to remain in line with the budget due to higher revenues and lower regular capital spending.
- Balance of payments impact:
  - Export losses projected mild at $60 million owing to damage in shrimp and fisheries sector.
  - Disaster-related food and fertilizer imports will boost import bill by about $530 million ($630 million on a c.i.f. basis).
  - Foreign budget support of $225 million and current transfers of $220 million (mostly in the form of food) will offset part of the impact; remainder borne by official reserves.
  - Without additional balance of payments support, official reserves would decline below three months of import coverage by end-June 2008.
  - Key balance of payments indicators (Before/After disasters, in millions of US$):
    - Exports (f.o.b): 13,202 / 13,142
    - Imports (c.i.f.): 20,006 / 20,638
    - Official transfers: 873 / 309
    - Net aid flows: 595 / 820
    - Gross official reserves (months of imports): 3.1 / 2.9
  - Exchange rate: Tk 68–69 per dollar; nominal effective rate depreciated by 4 percent from August through end-February.
- Monetary stance:
  - Reserve money growth declined a further 3.8 percentage points to 12.4 percent in December.
  - Broad money growth came down 2.3 percentage points to 14.7 percent.
  - Private credit growth increased to 17.5 percent, partly reflecting directed lending programs.
  - Authorities’ monetary policy statement of January 2008 aims to support recovery in real sector growth while ensuring reasonable price stability.
- Short-term risks:
  - Downside risks include a larger-than-envisaged decline in export growth and increased food import needs if the main (Boro) rice crop harvested in May is smaller than projected.
- Institutional disaster-management initiatives:
  - Considered modalities: (i) a Disaster Response Fund for early recovery funding; (ii) exploring catastrophic risk coverage from international capital markets; (iii) establishing a multi-donor trust fund to support a risk mitigation agenda related to global climate change.
  - Cyclone Preparedness Program provided four days of advanced warning and house-to-house evacuation messages, substantially reducing fatalities.

### Access and capacity to repay
- Fund request and rationale:
  - Authorities requested a purchase equivalent to SDR 133.3 million (25 percent of quota) under the Fund’s policy on Emergency Assistance for Natural Disasters, along with a subsidy on the rate of charge.
  - The purchase represents approximately 0.3 percent of Bangladesh’s GDP and would prevent reserves falling below three months of import coverage.
- Subsidy resources and availability:
  - As of end-2007, the Fund's available subsidy resources for emergency assistance amounted to SDR 25 million.
  - Total subsidy needs in net present value terms projected at about SDR 49 million, including existing cases (SDR 16 million), Bangladesh’s request (SDR 24 million) and an expected request for EPCA from another member (SDR 8 million).
  - Based on these estimates, and assuming no further requests, available subsidy resources likely to be exhausted by end-2009 if new resources are not secured.
  - Staff initiated discussions with potentially interested members on mobilizing additional resources; subsidization remains subject to resource availability.
- Capacity to repay and debt outlook:
  - Expected that Bangladesh will be able to discharge obligations to the Fund in a timely manner given authorities’ policies.
  - Medium-term growth potential remains positive, supported by regional momentum.
  - Rehabilitation and reconstruction needs beyond FY08 expected to be financed by external assistance.
  - Gross official reserves projected to increase steadily and remain at three months of import coverage.
  - Latest debt sustainability analysis attests Bangladesh is at low risk of external debt distress.
  - Debt service projected to be less than 5 percent of exports of goods and services.
  - Debt service payments to the Fund projected to remain below 2 percent of gross official reserves throughout the repayment period.
- Procedural note:
  - Following elections projected by December 2008 and formation of a new government, discussions could resume on a possible new Fund-supported program.

### Staff appraisal and Board action
- Staff supports the authorities’ request for emergency assistance under the Fund’s policy on natural disasters to help prevent a deterioration in international reserves and to meet immediate foreign exchange needs stemming from the disasters.
- Staff emphasizes that subsidization of the rate of charge is subject to availability of subsidy resources.
- Executive Board approved SDR 133 million (about US$217.7 million) in emergency assistance to Bangladesh.
- Repayment terms: Emergency assistance is repaid in eight equal quarterly installments over 3¼ to 5 years from the disbursement date.
- Subsidy on rate of charge: For PRGF-eligible countries hit by natural disaster, rate of charge on assistance will be subsidized to 0.5 percent per annum, subject to resource availability.

### Authorities’ requests, assessments, and financing plan (authorities’ submissions)
- Request and context:
  - Authorities requested a purchase of an amount equivalent to SDR 133.3 million under the Fund’s policy on ENDA with a subsidy on the rate of charge, by letter of March 14.
  - Request followed a joint government-donor assessment and securing commitment of donor support against assessed damages.
- Impact of Super Cyclone Sidr:
  - Super-cyclone Sidr struck Bangladesh on November 15, 2007, following two debilitating floods.
  - At least 4,400 people died; 55,000 were injured; 8.7 million people were displaced and had their livelihoods disrupted.
  - Joint assessment determined loss of assets and damage at US$2.7 billion or 3.7 percent of the GDP.
- Government response and financing plan (FY08):
  - Estimated relief and reconstruction cost: US$850 million.
  - External funding secured: about US$450 million, comprising US$220 million in grants (extra budgetary) and US$225 million as direct budget support from the World Bank and AsDB.
  - Residual financing gap: US$220 million to be met from improved revenue collection and reallocation within the budget.
  - Allocated 430,000 tons of food to expand the Vulnerable Group Feeding Programme and Open Market Sales of rice.
  - Allocated Taka 40 billion (against budgeted Taka 22.5 billion) for fertilizer and direct diesel subsidy, enough to cater to 80 percent of augmented demand.
  - Diverted Taka 40 billion obtained by pruning lower priority ADP projects to augment social safety nets and fund subsidies amounting to Taka 68 billion.
  - Despite increased outlays, the overall budget deficit is expected to be close to the originally projected budget deficit for the year, enabled by revenue collection rises: 25 percent in tax revenue and 34 percent in non-tax revenue.
- Balance of payments pressures:
  - Combined private and public sector rice imports through January 2008 rose almost nine fold—to US$455 million—compared to the same period in the previous fiscal year.
  - Total rice imports arising because of the disasters are now expected to exceed the earlier estimated 1.25 million metric tons due to government’s decision to expand open market sales.
  - Assistance requested under the ENDA policy will help ensure the reserve position is protected in the face of looming large food imports.

*IMF staff report: Executive Summary of Country Report _cr08138.*

### Executive Summary ......................................................................................................

### _cr08138 - Executive Summary

### Background
- A devastating cyclone struck the coast of Bangladesh on November 15, 2007 shortly after severe flooding. The floods occurred between July and September 2007.
- Human and physical toll:
  - At least 4,400 deaths from the cyclone; floods killed over a thousand people.
  - Almost 9 million people disrupted by the cyclone; floods displaced 1.0 million elsewhere in the region (see regional table).
  - Damage from floods and cyclone estimated at $2.7 billion (3.7 percent of GDP).
  - Flood damage estimated at $1.1 billion (1.5 percent of GDP); cyclone damage estimated at $1.6 billion (2.2 percent of GDP).
- Relief and reconstruction costs for FY08:
  - Total program cost estimated at $850 million.
  - Approximately $450 million in funding secured from development partners, including about $220 million in grants (commodity aid and NGO assistance) outside central government budget, and $225 million in additional budget support from the World Bank and the AsDB.
  - Direct central government budgetary cost about $450 million, to be financed by additional budget support, improved revenue collections, and budgetary reallocations.
- Authorities requested a purchase of SDR 133.3 million (25 percent of quota) under the Fund’s policy on emergency assistance for natural disasters; staff supports the request.

### Economic developments preceding the disasters
- Growth and inflation:
  - Growth forecast revised from an estimated 6¼ percent in FY07 to about 6 percent for FY08 prior to disasters.
  - Consumer price inflation: 6 percent half a year earlier; 9 percent (year-on-year) in June 2007.
- Fiscal and SOE situation:
  - Central government budget deficit considered on track; ADP implementation rate in early FY08 the lowest in a decade.
  - FY08 budget assumed debt equivalent to 1.4 percent of GDP from the state-owned petroleum company (BPC) for past losses; without further energy price adjustments, new SOE losses could reach 1–1½ percent of GDP in FY08.
- External position:
  - Debt sustainability analysis found low levels of external debt but moderate risk of debt distress overall because of domestic debt.
  - Remittances growing in excess of 20 percent.
  - Import coverage of official reserves on pace to fall to 3.1 months in FY08, compared to 3.3 months in FY07, even without disasters.
- Monetary indicators (pre-disasters):
  - Reserve money growth declined from 34 percent in December 2006 to 16 percent by June 2007.
  - Broad money growth and private credit growth declined by about 5 percentage points to 17 percent and 15 percent, respectively.
- Structural reforms and institutional changes:
  - New container terminal at Chittagong port placed under private management; turnaround time for ships reduced from 8.7 days in March to 2.8 days in January.
  - Tax administration reforms: separation of tax administration and tax policy responsibilities; merge of Large Taxpayer Units; unique taxpayer identification numbers; self assessment system increased individual taxpayer submissions threefold.
  - Governance improvements: separation of judiciary from executive; strengthened Anti-Corruption Commission.
  - More gradual approach to privatization of state-owned commercial banks; energy price adjustment pending.

### Impact and policy response
- Output and inflation impacts:
  - More than 2.4 million acres of cropland reported damaged; almost one-quarter of the November crop ready to harvest lost; most shrimp farms in cyclone-affected areas destroyed.
  - Staff projects growth reduced by ¾ of a percentage point to 5–5½ percent.
  - Inflation: increased by a further 2½ percentage points since September to 11½ percent in January (year-on-year); food price increases of 14 percent.
  - Inflation expected to moderate only slightly to 10 percent by end-FY08 given prevailing high international prices.
- Authorities’ disaster response measures:
  - Distribute to vulnerable groups at subsidized prices about 500,000 metric tons of rice imported by the government; total import need estimated at 1.25 million metric tons with much imported by the private sector.
  - Distribute seeds, fertilizer, and insecticides to disaster-affected farmers.
  - Provide benefits for disaster-related deaths and injuries, cash transfers to repair and rebuild homes, and low-interest loans to fishermen and farmers.
  - Begin repairing and reconstructing roads, bridges, coastal embankments, and the electricity distribution network.
- Fiscal impact and financing:
  - Fiscal cost of the disaster program for FY08 estimated at Tk 31 billion ($450 million; 0.6 percent of GDP), of which Tk 18 billion for social assistance programs (including subsidized food and fertilizer) and the remainder for capital spending.
  - Tax revenue collected by the National Board of Revenue rose by 25 percent in the fiscal year to January, led by income taxes and VAT; FY08 budget assumed revenue growth of 17 percent and this target could be exceeded by 0.3 percentage points of GDP.
  - Disaster-related donor assistance amounts to 0.3 percent of GDP; net domestic financing expected to remain in line with the budget due to higher revenues and lower regular capital spending.
- Balance of payments impact:
  - Export losses projected mild at $60 million owing to damage in shrimp and fisheries sector.
  - Disaster-related food and fertilizer imports will boost import bill by about $530 million ($630 million on a c.i.f. basis).
  - Foreign budget support of $225 million and current transfers of $220 million (mostly in the form of food) will offset part of the impact; remainder borne by official reserves.
  - Without additional balance of payments support, official reserves would decline below three months of import coverage by end-June 2008.
  - Key balance of payments indicators (Before/After disasters, in millions of US$):
    - Exports (f.o.b): 13,202 / 13,142
    - Imports (c.i.f.): 20,006 / 20,638
    - Official transfers: 873 / 309
    - Net aid flows: 595 / 820
    - Gross official reserves (months of imports): 3.1 / 2.9
  - Exchange rate: Tk 68–69 per dollar; nominal effective rate depreciated by 4 percent from August through end-February.
- Monetary stance:
  - Reserve money growth declined a further 3.8 percentage points to 12.4 percent in December.
  - Broad money growth came down 2.3 percentage points to 14.7 percent.
  - Private credit growth increased to 17.5 percent, partly reflecting directed lending programs.
  - Authorities’ monetary policy statement of January 2008 aims to support recovery in real sector growth while ensuring reasonable price stability.
- Short-term risks:
  - Downside risks include a larger-than-envisaged decline in export growth and increased food import needs if the main (Boro) rice crop harvested in May is smaller than projected.
- Institutional disaster-management initiatives:
  - Considered modalities: (i) a Disaster Response Fund for early recovery funding; (ii) exploring catastrophic risk coverage from international capital markets; (iii) establishing a multi-donor trust fund to support a risk mitigation agenda related to global climate change.
  - Cyclone Preparedness Program provided four days of advanced warning and house-to-house evacuation messages, substantially reducing fatalities.

### Access and capacity to repay
- Fund request and rationale:
  - Authorities requested a purchase equivalent to SDR 133.3 million (25 percent of quota) under the Fund’s policy on Emergency Assistance for Natural Disasters, along with a subsidy on the rate of charge.
  - The purchase represents approximately 0.3 percent of Bangladesh’s GDP and would prevent reserves falling below three months of import coverage.
- Subsidy resources and availability:
  - As of end-2007, the Fund's available subsidy resources for emergency assistance amounted to SDR 25 million.
  - Total subsidy needs in net present value terms projected at about SDR 49 million, including existing cases (SDR 16 million), Bangladesh’s request (SDR 24 million) and an expected request for EPCA from another member (SDR 8 million).
  - Based on these estimates, and assuming no further requests, available subsidy resources likely to be exhausted by end-2009 if new resources are not secured.
  - Staff initiated discussions with potentially interested members on mobilizing additional resources; subsidization remains subject to resource availability.
- Capacity to repay and debt outlook:
  - Expected that Bangladesh will be able to discharge obligations to the Fund in a timely manner given authorities’ policies.
  - Medium-term growth potential remains positive, supported by regional momentum.
  - Rehabilitation and reconstruction needs beyond FY08 expected to be financed by external assistance.
  - Gross official reserves projected to increase steadily and remain at three months of import coverage.
  - Latest debt sustainability analysis attests Bangladesh is at low risk of external debt distress.
  - Debt service projected to be less than 5 percent of exports of goods and services.
  - Debt service payments to the Fund projected to remain below 2 percent of gross official reserves throughout the repayment period.
- Procedural note:
  - Following elections projected by December 2008 and formation of a new government, discussions could resume on a possible new Fund-supported program.

### Staff appraisal
- Staff supports the authorities’ request for emergency assistance under the Fund’s policy on natural disasters to help prevent a deterioration in international reserves and to meet immediate foreign exchange needs stemming from the disasters.
- Staff emphasizes that subsidization of the rate of charge is subject to availability of subsidy resources.

*IMF staff report: Executive Summary of Country Report _cr08138.*

### 20.      Following severe flooding, the impact of cyclone Sidr on Bangladesh has been

### 20.      Following severe flooding, the impact of cyclone Sidr on Bangladesh has been

### Impact on welfare, balance of payments, and fiscal position
- Substantial impact on welfare and livelihood of some of the world’s poorest and most vulnerable groups.
- Extensive damage to agriculture and infrastructure has:
  - Led to a sharp increase in import needs, in the near term for food and other primary needs.
  - Put further pressure on the balance of payments and fiscal position.
- High international commodity prices and slowing export growth had already reduced the economy’s room for maneuver prior to the cyclone.

### Authorities’ response and macroeconomic framework
- The authorities’ letter of intent outlines steps taken in response to the disasters and efforts to:
  - Maintain macroeconomic stability.
  - Advance the structural reform agenda.
- Staff welcomes the authorities’ intention to make use of available external assistance while keeping the overall fiscal framework in line with the original FY08 budget targets.
- Keeping domestic financing of the budget under control is important to avoid further aggravating inflationary pressures.

### Revenue performance and tax reform recommendations
- Recent progress in revenue performance, if sustained, will be a fundamental element of improved macroeconomic performance going forward.
- Staff urges the authorities to:
  - Continue to move forward with reforms underway in tax administration.
  - Implement policy changes with respect to income taxes and VAT to broaden the base and reduce exemptions to achieve sustainable long-term improvement in revenue performance.

### Public enterprises, energy pricing, and banking sector priorities
- On-going quasi-fiscal liabilities being generated in SOEs still need to be addressed, especially with respect to energy pricing policy, to establish a sustainable fiscal policy.
- Structural priorities include:
  - Reinvigorating reforms in the state-owned commercial banks.
  - Strengthening prudential regulations for the wider banking sector.

*Source: _cr08138 - 20.      Following severe flooding, the impact of cyclone Sidr on Bangladesh has been*

### 23.      Staff supports the authorities’ request for a purchase under the Fund’s policy on

### _cr08138 - 23.      Staff supports the authorities’ request for a purchase under the Fund’s policy on

### Staff recommendation and rationale
- Staff supports the authorities’ request for a purchase under the Fund’s policy on emergency assistance for natural disasters.
- The authorities’ requested purchase in the amount of 25 percent of quota is appropriate in view of:
  - the damage to the agricultural sector in very poor and vulnerable areas,
  - the associated large need for food and other imports.
- It is estimated that this level of access would allow the authorities to maintain international reserves at about three months of import coverage.
- Staff also supports the request in view of:
  - the authorities’ efforts to maintain macroeconomic stability and continue the implementation of reforms after the expiration of the PRGF-supported arrangement in June 2007,
  - their commitment to continue working closely with the Fund in developing their reform strategy in the period ahead.

### Disaster impact and government requests
- Government request: a purchase equivalent to SDR 133.325 million (25 percent of quota) under the Fund’s policy on ENDA and a subsidy on the rate of charge on such purchase, subject to resource availability.
- Estimated combined impact of floods and cyclone: US$2.7 billion (3.7 percent of GDP).
- Human and social impact reported by authorities:
  - Two consecutive floods between July and September 2007 killed over a thousand people.
  - Cyclone on November 15, 2007 killed nearly 4,000 people and adversely affected the lives of 8.7 million people.
  - Damage and losses primarily in coastal districts with higher-than-average poverty.
- Short-term fiscal and reconstruction cost estimates provided by authorities:
  - Immediate activities (food security, shelter, health care, income support, repairs) expected to cost around US$300 million (much already incurred).
  - Long-term reconstruction program expected to cost around US$1 billion over a five year period.

### Macroeconomic effects and balance of payments pressures
- Overall effect on GDP growth of the two disasters: around 0.7 of a percentage point in 2007/08 (mainly due to impacts on agricultural production and fisheries).
- Direct budgetary cost of relief activities estimated at about 0.6 percent of GDP in 2007/08.
- Short-term additional import needs estimated: more than $600 million (including more than 10 times as much rice as in previous years at import prices 60 to 70 percent higher than one year ago, and additional fertilizer at much higher prices).
- Disaster-related reduction of exports estimated: around $60 million (on account of lost shrimp exports).
- International community assistance already filled around $400 million of financing need (World Bank, AsDB, and key bilateral donors), leaving a substantial gap.
- Authorities expect disaster-related urgent food imports to deplete international reserves below levels targeted under the PRGF-supported program without ENDA support.
- ENDA purchase would help maintain international reserves at above three months of import coverage.

### Policy stance and conditional commitments
- Exchange rate and payments:
  - Authorities will continue to operate a flexible exchange rate policy.
  - Government does not intend to introduce any new, nor intensify existing exchange restrictions or multiple currency practices as per Article VIII of the Fund’s Articles of Agreement.
  - No intent to introduce any restrictions on, or changes to prevailing trade or payments arrangements.
- Monetary and fiscal management:
  - Authorities intend to contain domestic financing to the government to budgeted levels to allow monetary policy to maintain reasonable domestic price stability and support private sector growth.
  - Plan to reprogram a significant amount of budgeted expenditure, mainly from lower priority capital projects, to avoid overrunning domestic financing target.
  - Reconstruction to be prioritized in 2008/09 Annual Development Program while maintaining a prudent fiscal stance.
- Revenue and reform measures:
  - Continued commitment to improving fiscal performance by broadening the tax base and improving management of public revenues and expenditure.
  - Recent steps to improve revenue administration; planned measures include merging Large Taxpayer Units, separating tax policy from administration, revising the income tax law, and improving VAT administration (with Fund technical assistance).
  - Intention to adjust low administered prices on fuel and electricity toward market rates at an appropriate time.
  - Continued efforts to reform loss-making state-owned enterprises and state-owned commercial banks.
- Disaster management and risk mitigation:
  - Government working with stakeholders and donors to develop a Disaster Response Fund and explore other means of financial support and a risk mitigation agenda related to global climate change.

### IMF Executive Board decision and terms
- Executive Board approved SDR 133 million (about US$217.7 million) in emergency assistance to Bangladesh.
- Emergency assistance objective: assist government efforts to deal with impact of November 2007 cyclone following severe monsoon-related flooding and support Bangladesh’s international reserve position amid large disaster-related imports.
- Repayment terms: Emergency assistance is repaid in eight equal quarterly installments over 3¼ to 5 years from the disbursement date.
- Subsidy on rate of charge: For PRGF-eligible countries hit by natural disaster, rate of charge on assistance will be subsidized to 0.5 percent per annum, subject to resource availability.

### Key reported numerical indicators and projections (as provided)
- Requested ENDA purchase: 25 percent of quota; SDR 133.325 million.
- ENDA approval by Executive Board reported as: SDR 133 million (about US$217.7 million).
- Disaster damage estimate: US$2.7 billion (3.7 percent of GDP).
- People adversely affected by cyclone: 8.7 million.
- Cyclone and floods reported deaths: at least 4,400 (Press Release); authorities’ letters cite "over a thousand" (floods) and "nearly 4,000" (cyclone).
- Short-term additional imports need: more than $600 million.
- Disaster-related export reduction: around $60 million.
- Emergency aid already provided by World Bank, AsDB, and key bilateral donors: around $400 million.
- Expected maintenance of international reserves with ENDA: about three months of import coverage.
- Direct relief cost incurred/expected: around US$300 million.
- Long-term reconstruction cost: around US$1 billion over five years.
- GDP nominal figures and other macro data are reported throughout source tables (examples preserved as presented):
  - Nominal GDP: US$61.9 billion
  - Main export (percent of total): garment (75)
  - Population (FY05): 139.5 million
  - GDP per capita (FY05): US $430
  - Poverty rate (FY05): 40.8 percent
  - FDI (percent of GDP): US $760 million (1.1)
  - Government debt: 46.5 percent of GDP
  - Foreign government debt: 62 percent of total government debt
  - Table 2 highlights: Trade balance FY08 with floods & cyclone: -5,597 (millions of U.S. dollars); Exports (f.o.b.) FY08 with floods & cyclone: 13,142; Imports (f.o.b.) FY08 with floods & cyclone: -18,739.
  - Gross official reserves (in millions of U.S. dollars) across years include: 2.5, 2.7, 2.9, 3.5, 5.1, 5.5, 6.4, 7.3, 8.4, 9.8, 11.3 (as presented in time series).
  - Outstanding Fund credit (In millions of SDRs) examples: 316.7, 316.7, 445.1, 430.3, 400.6, 317.3, 187.3, 95.6, 47.1 (table entries).
  - Quota (millions of SDRs): 533.30 (100.00 percent).
  - Projected Fund obligations and related percentages and monetary series are reported in the source tables and figures as presented.

*Source: IMF staff report and associated tables, annex, and letters as presented in the provided content unit.*

### 1. My authorities would like to record their appreciation to the IMF staff for putting

### 1. My authorities would like to record their appreciation to the IMF staff for putting

### Request and context
- Authorities requested a purchase of an amount equivalent to SDR 133.3 million under the Fund’s policy on ENDA with a subsidy on the rate of charge, by letter of March 14.
- Request was made after: completion of a joint government-donor assessment of the damage; securing commitment of donor support against assessed damages; analyzing the revenue position; and determining feasible reallocation of resources within the budget.

### Impact of Super Cyclone Sidr
- Event and timing:
  - Super-cyclone Sidr struck Bangladesh on November 15, 2007, following two debilitating floods.
- Human and livelihood impact:
  - At least 4,400 people died.
  - 55,000 were injured.
  - 8.7 million people were displaced and had their livelihoods disrupted.
- Damage characteristics:
  - Livestock, infrastructure and other assets were heavily affected by the tidal surge.
  - Severity concentrated in coastal areas, affecting the poorest segments of society.
- Quantified loss:
  - Joint assessment by the Government, World Bank and other donors determined loss of assets and damage at US$2.7 billion or 3.7 percent of the GDP.
  - Damage concentrated mainly in the housing, agriculture, fisheries and transport sectors, with the private sector sustaining most of the damages.

### Government response and financing plan (FY08)
- Estimated relief and reconstruction cost: US$850 million.
- External funding secured: about US$ 450 million, comprising:
  - US$ 220 million in grants (extra budgetary).
  - US$ 225 million as direct budget support from the World Bank and AsDB.
- Residual financing gap: US$ 220 million to be met from improved revenue collection and reallocation within the budget.
- Budgetary and fiscal measures:
  - Allocated 430,000 tons of food to expand the Vulnerable Group Feeding Programme and Open Market Sales of rice.
  - Allocated Taka 40 billion (against budgeted Taka 22.5 billion) for fertilizer and direct diesel subsidy, enough to cater to 80 percent of augmented demand.
  - Diverted Taka 40 billion obtained by pruning lower priority Annual Development Plan (ADP) projects to augment social safety nets and fund subsidies amounting to Taka 68 billion.
  - Despite increased outlays, the overall budget deficit is expected to be close to the originally projected budget deficit for the year, enabled by:
    - Revenue collection rises: 25 percent in tax revenue and 34 percent in non-tax revenue.
    - High flow of concessional foreign assistance directed at supporting flood and cyclone recovery efforts.
    - Reallocation of resources away from low priority ADP projects.
- Policy intent:
  - Government remains committed to maintaining reforms and will continue to promote economic growth, generate employment, reduce poverty and put the country on a higher growth trajectory.
  - Disaster-related shocks compounded by external shocks of spiraling food, fertilizer and oil prices, negatively impacting food production, restoration of communication systems and infrastructure, and general inflation.

### Balance of payments (BOP) pressures
- Rice and food import surge:
  - Combined private and public sector rice imports through January 2008 rose almost nine fold—to US$455 million—compared to the same period in the previous fiscal year.
  - Total rice imports arising because of the disasters are now expected to exceed the earlier estimated 1.25 million metric tons due to government’s decision to expand open market sales.
- Additional pressures:
  - Recent increases in oil and other commodity prices have further raised BOP pressure.
  - Of specific concern: the sharp rise in international rice prices in recent months.
- Role of IMF assistance:
  - Assistance requested under the ENDA policy will help ensure the reserve position is protected in the face of looming large food imports during the remainder of this fiscal year.

### Conclusion
- Authorities express appreciation to the IMF for its assistance as Bangladesh faces economic dislocation from the natural disasters.
- Authorities approve the publication of the staff report and their letter of intent following the conclusion of the Executive Board meeting.

*Source: IMF staff report and authorities' letter as presented in the content unit.*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2008/_cr08138.pdf_