## _cr1055 - 2006. A restriction remains in place on the convertibility and transferability of

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---

### Executive Summary — Economic Developments
- Growth and external:
  - Growth estimated at 5.9 percent for FY09.
  - Current account surplus: almost 3 percent of GDP in FY09 (July 2008-June 2009), up from less than 1 percent of GDP in FY08.
  - Gross reserves doubled to over US$10 billion in the year to November 2009, reserve coverage 4.8 months of prospective imports (15-year high).
- Inflation and asset prices:
  - CPI: 2.2 percent in June; 6.7 percent in October.
  - Stock market rose by 40 percent since March (as reported).
  - Real estate showing upward pressure.
- Fiscal FY09:
  - NBR revenue to GDP declined by 0.2 percent of GDP to 8.2 percent of GDP; short of original budget target by 0.7 percent of GDP.
  - ADP spending fell short of original budget by 1 percent of GDP.
  - Overall fiscal deficit (including grants) amounted to 3 percent of GDP.
- Monetary and liquidity:
  - Unsterilized FX interventions maintained de facto peg to U.S. dollar, pushed short-term interest rates below 1 percent and inflated banks’ excess reserves.
  - Subsequent tightening (BB bills from August; reverse repo from mid-October after reducing reverse repo rate by 200 basis points to 2.5 percent) removed limited liquidity.
  - Large high-cost government borrowing (NSCs, Treasury Bills and Bonds) accumulated government deposits with Bangladesh Bank (BB): example—BB’s net claims on government declined by Tk 40 billion in October.
- Structural and financial sector:
  - Mixed progress on structural reforms; concerns on power and gas shortages, slow PPP progress, reintroduction of interest rate ceilings, and SCB appointments not fully in line with regulations.
  - Financial soundness generally favorable; weak state of state-owned commercial banks (SCBs) remains a concern.
- Policy focus:
  - Near-term: contain excess liquidity to prevent inflation.
  - Medium-term: tax reform and higher public investment to boost growth.

*IMF staff report based on Bangladesh authorities' data and staff estimates and projections.*

### Recent Economic Developments (selected)
- Growth and trade:
  - FY09 growth: 5.9 percent, broad-based.
  - No broad fiscal stimulus; modest budget reallocations only.
  - Exports held up, aided by basic textiles and garments; imports decelerated strongly.
- Remittances and migration:
  - Almost 1 million nationals migrated in year through June 2008; remittances surged through mid-2008.
- External position:
  - Current account surplus: almost 3 percent of GDP in FY09.
  - Gross international reserves exceeded US$10 billion in November 2009 (4.8 months of prospective imports).
- Monetary and asset-price effects:
  - Unsterilized FX purchases raised banks’ excess reserves and pushed short-term rates below 1 percent.
  - Stock market and real estate showed strong upward pressure.
- Fiscal:
  - Customs revenue shortfall from lower imports.
  - FY09 overall fiscal deficit (including grants) at 3 percent of GDP.

### Economic Outlook — Projections and Risks
- Near term:
  - Staff projects growth to decelerate to 5 percent in FY2010.
  - Inflation likely to rise throughout FY2010, "possibly to double digits by the summer."
  - As imports recover, need for official FX purchases should be reduced in second half of FY2010.
- Medium term:
  - Growth expected to edge up to around 6 percent per annum.
  - Current account expected to remain in surplus; import coverage of reserves to remain robust.
- Key projected indicators (Text Table 1):
  - Real GDP growth (in percent): FY08 6.2; FY09 5.9; FY10 5.0; FY11 5.8; FY12 6.0; FY13 6.0; FY14 6.0
  - CPI inflation (in percent, annual average): FY08 9.9; FY09 6.7; FY10 7.8; FY11 7.0; FY12 6.0; FY13 5.0; FY14 4.5
  - Central government total revenue: FY08 10.8; FY09 10.4; FY10 10.7; FY11 10.5; FY12 10.6; FY13 10.7; FY14 10.7
  - Tax revenue: FY08 8.8; FY09 8.6; FY10 8.8; FY11 8.8; FY12 8.9; FY13 9.0; FY14 9.0
  - Central government total expenditure: FY08 15.9; FY09 14.1; FY10 14.8; FY11 14.8; FY12 14.9; FY13 14.9; FY14 14.9
  - ADP (percent of GDP): FY08 3.4; FY09 3.2; FY10 3.3; FY11 3.3; FY12 3.3; FY13 3.3; FY14 3.3
  - Central government overall balance (excl. grants): FY08 -5.1; FY09 -3.7; FY10 -4.0; FY11 -4.3; FY12 -4.2; FY13 -4.2; FY14 -4.1
  - Total central government debt: FY08 46.7; FY09 45.3; FY10 44.0; FY11 44.1; FY12 44.0; FY13 43.8; FY14 43.6
  - External current account balance: FY08 0.9; FY09 2.8; FY10 2.9; FY11 1.4; FY12 0.8; FY13 0.8; FY14 0.8
  - Gross official reserves (US$ billions): FY08 6.1; FY09 7.5; FY10 10.9; FY11 12.3; FY12 13.2; FY13 14.5; FY14 16.2
  - Export growth (percent): FY08 17.4; FY09 10.1; FY10 3.2; FY11 7.6; FY12 11.1; FY13 13.3; FY14 12.9
  - Import growth (percent): FY08 25.6; FY09 4.2; FY10 3.5; FY11 11.7; FY12 11.0; FY13 11.5; FY14 11.2
- Risks to baseline:
  - Downside: prolonged global slump affecting exports and remittances (U.A.E. accounts for almost one-fifth of remittances), continued energy shortages deterring investment and FDI.
  - Upside: stronger-than-expected global recovery, jump in private sector investment, accelerated structural reforms.

### Macroeconomic Policy Discussions — Containing Excess Liquidity
- Sources and magnitude:
  - Unsterilized FX purchases injected liquidity; short-term interest rates below the notional corridor from April onwards; banks’ excess reserves at unprecedented levels.
  - Interest rate capping on lending to priority sectors used to boost lending.
- Authorities’ actions and limitations:
  - BB issued BB bills from August and reverse repos from mid-October; reverse repo rate reduced by 200 basis points to 2.5 percent; total liquidity withdrawn remained limited.
  - Large government borrowing (NSCs, T-bills, bonds) reduced excess liquidity by accumulating government deposits with BB (example: BB’s net claims on government declined by Tk 40 billion in October).
  - Staff advice: BB should issue a sufficiently large amount of BB bills—the main mop-up instrument—especially if government draws on deposits with BB.
  - BB signaled readiness to take strong actions if inflation and credit demand pick up; government indicated willingness to bear (quasi-)fiscal costs of mopping up.
- Policy trade-offs:
  - Larger BB bill issuance would raise market interest rates; staff viewed this as a small price to pay to avert harmful inflation acceleration.

### Monetary policy framework and systemic liquidity
- Staff proposals:
  - Move to a standing facility for repo and reverse repo operations and adopt an interest rate corridor to enhance credibility and predictability.
  - Averaging reserve requirements on a two-week maintenance period to help control short-term volatility.
- Authorities concurred but require fully functional open market operations first.

### Cash management — Challenges (Box 2)
- Cash management weaknesses and magnitudes:
  - Ministries and Departments held "1.1 percent of GDP at the end of FY2009" in commercial bank accounts.
  - Commercial bank deposits of autonomous and semi-autonomous government bodies: "1.8 percent of GDP at the end of FY2009."
  - NSCs outstanding: "8 percent of GDP."
  - NSC interest rates vary from "8½ to 12 percent"; changed only four times in past ten years.
  - Bank deposit and T-bill rates are "400–500 basis points lower" than NSC rates in current environment.
  - Recent NSC flows: net sales in "Q1 FY2010 of Tk 28 billion"; annual net sales target "Tk 33 billion" likely exceeded.
  - No law or rule requires unspent funds in commercial banks to be swept into TSA at fiscal year-end.
- Implication: cash management weaknesses raise interest bill and risk build-up of deposits at BB and commercial banks outside Ministry of Finance control.

### Improving exchange rate management
- Staff view: taka is somewhat undervalued, not far out of line with fundamentals.
- Staff recommendation: allow modest nominal appreciation of the taka to:
  - help reduce excess liquidity,
  - reduce pressure on monetary policy,
  - help dampen inflation,
  - unlikely to affect export competitiveness given recent sharp nominal depreciation vis-à-vis euro and yen.
- Benefits of greater flexibility: support financial sector development, encourage FX derivatives market, reduce costly sterilization operations.
- Authorities’ stance: will not contemplate greater flexibility; concerned about exporters.

### Boosting growth through higher capital spending
- Constraints:
  - Tax-to-GDP ratio stable at around "8.5 percent" for past several years — about "4 percentage points lower" than regional peers.
  - Capacity constraints and governance cause chronic ADP under-implementation; FY2010 budget envisaged a "56 percent increase in ADP spending" over FY09 outturn but implementation averaged "73 percent over the past 5 years."
- Reform scenario (staff): tax revenue to "11.6 percent" of GDP (still "one percentage point of GDP below the regional average") implying fundamental income tax and VAT reforms.
- Text Table 2 (reform scenario selected indicators, FY08–FY14 as presented):
  - Real GDP growth (percent): "6.2 5.9 5.0 6.3 6.9 7.5 8.0"
  - CPI inflation (annual average): "9.9 6.7 7.8 7.0 6.0 5.8 5.3"
  - Central government total revenue: "10.8 10.4 10.7 11.3 12.0 12.7 13.5"
  - Tax revenue: "8.8 8.6 8.8 9.4 10.1 10.8 11.6"
  - Central government total expenditure: "15.9 14.0 14.8 15.4 15.9 16.7 17.4"
  - ADP: "3.4 3.2 3.3 4.0 4.7 5.7 6.6"
  - Central government overall balance (excl. grants): "-5.1 -3.7 -4.0 -4.1 -4.0 -4.0 -4.0"
  - Total central government debt: "46.7 45.4 44.0 43.8 43.1 42.3 41.3"
  - External current account balance: "0.9 2.8 2.9 1.4 0.5 0.1 -0.5"
  - Gross official reserves (US$ billions): "6.1 7.5 10.9 12.5 13.6 14.6 15.5"
  - Export growth (percent): "17.4 10.1 3.2 11.9 15.5 15.9 15.4"
  - Import growth (percent): "25.6 4.2 3.5 14.6 14.6 14.8 14.7"

### Risks to fiscal sustainability and financing
- Concerns:
  - Escalating foreign borrowing, especially non-concessional, could weaken external debt position; donors may not meet demand.
  - Possible shortfall in net external financing in FY2010 despite ADB budget support.
  - Financing higher capital spending domestically from high-cost NSCs could undermine fiscal sustainability by raising interest bill and fiscal deficit.
- Authorities committed to VAT legislation submission in FY2011 budget and to higher ADP implementation and commencing PPPs in FY2010 budget.

### Reforms of energy prices and SOEs
- Current domestic petroleum product and electricity prices are below levels needed to cover SOE input costs; energy and fertilizer subsidies likely to rise.
- Staff recommendation: early and more frequent retail energy price adjustments combined with targeted compensation for the poor to avoid accumulation of large losses.
- Reducing infrastructure bottlenecks (including oil-import facilities) can lower transportation and distribution costs, reducing need for higher retail prices.

### Financial sector reforms and oversight
- July 2009 FSAP Update: considerable progress since 2003 FSAP but asset quality remains weak; large share of loans classified substandard, doubtful, and loss.
- SCBs:
  - Three large SCBs corporatized in 2007 and brought under BB regulatory authority; finances improved but still weak relative to private banks.
  - Rupali Bank identified as weakest; recommended to be brought under same restructuring and monitoring program promptly.
- Staff recommendations:
  - Provide strategic guidance and business-principled decisions at SCB Boards and management.
  - BB to closely monitor corporatized SCBs with verifiable indicators and take corrective supervisory measures as needed.
  - Strengthen prudential and regulatory enforcement; bring microcredit and NBFIs within regulatory perimeter.
  - Remove non-prudential interventions (ceiling on lending rates, moral suasion, directed lending) as soon as possible.
  - Increase interest rate flexibility for NSCs to improve auctions, active secondary market, financial deepening, and reduce borrowing costs.
- Authorities’ measures:
  - Preparing for introduction of Basel II regulations effective "January 1, 2010."
  - Raising banks’ capital quality; creating risk management units; strengthening BB stress testing capacity; requesting merchant banking run through subsidiaries; engaging resident advisor for BB supervision.

### Improving statistics
- Priorities:
  - Improve trade statistics.
  - Adopt a Statistics Act to clarify responsibilities and provide autonomy to BBS.
  - Improve and update source data for national accounts.
  - Move toward Government Financial Statistics Manual 2001 standards for fiscal statistics.
  - Ensure BBS has sufficient staff and resources.

### Staff appraisal — key messages
- Bangladesh’s economy performed robustly despite global recession; fiscal conservatism contributed to resilience.
- Staff baseline: medium-term growth at "6 percent."
- Immediate priority: prevent an increase in inflation — monetary policy has been too accommodative; BB should act preemptively and boldly; higher market interest rates warranted.
- Staff reiterates that greater exchange rate flexibility would support monetary policy objectives and deepen FX market; taka considered somewhat undervalued.
- Medium-term priority: mobilize revenues (VAT reforms) to enable higher capital spending and address infrastructure bottlenecks.

### Exchange restriction on nonresident taka accounts
- As there is no timetable for removal of the one remaining exchange restriction on transferability of funds in nonresident taka accounts, staff does not recommend approval by the Board.

### Recommendation on Article IV cycle
- It is recommended that the next Article IV consultation with Bangladesh take place on the standard 12-month cycle.

---

### Debt Sustainability Analysis (Joint IMF/World Bank; selected findings)
- External debt:
  - External debt equivalent to 24 percent of GDP at end-FY2009; down from 27 percent at end-FY2007.
  - NPV of external debt-to-GDP decreases from about 20 percent in 2009 to less than 10 percent during projection period; indicative threshold: 40 percent.
  - NPV of external debt-to-exports decreases from 99 percent in 2009 to 25 percent; indicative threshold: 150 percent.
  - Debt service ratio decreases from 6 percent in 2010 to 2½ percent; indicative threshold: 20 percent.
  - Standardized stress tests: no thresholds breached.
- Public (total) debt and domestic debt:
  - Domestic debt rose modestly to 21.2 percent of GDP in FY09.
  - Instrument composition (end-FY09): Treasury Bills and Bonds 39 percent; NSCs 38 percent; Other (including BB overdrafts) 23 percent.
  - Bangladesh Bank holds more than 20 percent of government’s domestic debt.
  - Government deposit balances with commercial banks: Tk 183 billion (3 percent of GDP) at end-FY2009.
  - Net domestic government debt about 18.2 percent of GDP at end-FY2009.
  - Baseline NPV of public debt-to-GDP ~40 percent through FY2015, declines to 37 percent in FY2030.
- DSA conclusions:
  - Risk of debt distress low based on external indicators; elevated risk when domestic debt included.
  - Debt indicators sensitive to alternative assumptions; sizeable risks under adverse scenarios (e.g., one-off 10 percent of GDP debt-creating flow raises debt service to revenue ratio to 36 percent in FY2015 versus baseline 28 percent).
- Macroeconomic assumptions (selected):
  - Medium-term real GDP growth projected at 6 percent; long-run 6¼ percent; 10-year average 5.8 percent.
  - Remittances projected to increase by 9 percent per annum.
  - Net aid inflows ~1.3 percent of GDP medium/long term.
  - Amortization: US$720 million in FY2010; US$850 million in FY14.
  - Grant element of new external borrowing assumed about 30 percent.
  - Primary fiscal deficit (including grants) assumed to average 1 percent of GDP over medium term.
  - Real interest rates on domestic currency government debt assumed about 6 percent in medium term.
- Debt management recommendations:
  - Strengthen institutional arrangements for total public sector debt management.
  - Develop comprehensive public debt database covering domestic and external debt and integrate with external aid reporting.
  - Improve cash balance management and cash-flow forecasting; address recording and reconciliation deficiencies.

### DSA policy priorities and staff recommendations
- Mobilize domestic revenues.
- Appropriately manage contingent liabilities.
- Continue prudent expenditure management while protecting priority spending.
- Improve debt management capacity and oversight of new debt accumulation.
- Integrate domestic debt monitoring into debt recording and reporting.

*IMF staff report based on Bangladesh authorities' data and staff estimates and projections.*

### 2006. A restriction remains in place on the convertibility and transferability of

### _cr1055 - 2006. A restriction remains in place on the convertibility and transferability of

### Executive Summary — Economic Developments
- Growth decelerated only modestly: estimated at 5.9 percent for FY09.
- Current account surplus: almost 3 percent of GDP in FY09 (July 2008-June 2009), up from less than 1 percent of GDP in FY08.
- Gross reserves doubled to over US$10 billion in the year to November 2009, raising reserve coverage to 4.8 months of prospective imports, a 15-year high.
- Inflation developments:
  - Inflation fell to 2.2 percent in June (benefitting from a decline in international food and commodity prices).
  - Inflation rose to 6.7 percent in October as international food and commodity prices began to rise again.
- Fiscal outcomes FY09:
  - NBR revenue to GDP declined by 0.2 percent of GDP to 8.2 percent of GDP, falling short of the original budget target by 0.7 percent of GDP.
  - ADP spending fell short of the original budget by 1 percent of GDP.
  - Overall fiscal deficit (including grants) amounted to 3 percent of GDP, almost 1 percentage point of GDP smaller than envisaged in the original budget.
- Monetary policy:
  - Unsterilized foreign exchange interventions to maintain the de facto peg to the U.S. dollar pushed short-term interest rates below 1 percent and inflated banks’ excess reserves.
  - Subsequent tightening (issuance of BB bills from August; reverse repo operations from mid-October after reducing the reverse repo rate by 200 basis points to 2.5 percent) was insufficient; total liquidity removed remained limited.
  - Large high-cost government borrowing (NSCs, Treasury Bills and Bonds) reduced excess liquidity by accumulating government deposits with Bangladesh Bank (BB). Example: during October, BB’s net claims on government declined by Tk 40 billion.
- Structural reforms progress: mixed; concerns include power and gas shortages, slow PPP progress, reintroduction of interest rate ceilings, and appointments at SCBs not fully in line with regulations.
- Financial soundness: generally favorable, but weak state of state-owned commercial banks (SCBs) remains a concern; FSAP Update recommendations being acted upon.

### Background
- Political transition: military-backed caretaker government left office in favor of Sheikh Hasina’s Awami League (AL)-led government in January 2009; AL won more than the two-thirds parliamentary majority.
- Policy priorities declared by government: alleviating poverty and reducing consumer prices; administered prices of fertilizer and diesel were reduced.
- Implementation of broader economic reforms has been slow; private sector-led growth reforms progressing slowly.

### Recent Economic Developments
- Growth and trade:
  - Growth in FY09 estimated at 5.9 percent, broad-based.
  - No fiscal stimulus beyond modest budget reallocation supporting sectors affected by global downturn.
  - Exports held up relatively well, aided by basic textiles and garments; imports decelerated strongly due to abundant harvest, lower international oil and commodity prices, deceleration of private sector credit, and a wait-and-see attitude depressing import of capital machinery.
- Remittances and migration:
  - Almost 1 million Bangladeshi nationals migrated in the year through June 2008; continued strong increase in remittances reflected surge in manpower exports through mid-2008.
- External position:
  - Current account surplus of almost 3 percent of GDP in FY09.
  - Gross international reserves exceeded US$10 billion in November 2009 (4.8 months of prospective imports).
- Monetary and asset-price effects:
  - Unsterilized foreign exchange purchases to counter upward pressure on the taka caused banks’ excess reserves to rise sharply and short-term interest rates to fall below 1 percent.
  - Asset price inflation: real estate upward pressure visible; stock market rose by 40 percent since March (year unspecified in extract).
- Fiscal:
  - Customs revenue shortfall due to lower imports.
  - FY09 overall fiscal deficit (including grants) at 3 percent of GDP.

### Economic Outlook
- Near term:
  - Staff projects growth to decelerate to 5 percent in FY2010.
  - Inflation likely to rise throughout FY2010, "possibly to double digits by the summer" (hedged wording preserved).
  - As imports recover, need for official foreign exchange purchases will be reduced in the second half of FY2010, easing external pressure on monetary policy.
- Medium term:
  - Growth expected to edge up to around 6 percent per annum (Text Table 1).
  - Current account expected to remain in surplus; import coverage of reserves to remain robust.
- Key projected indicators (Text Table 1 — presented as in source):
  - Real GDP growth (in percent): FY08 6.2; FY09 5.9; FY10 5.0; FY11 5.8; FY12 6.0; FY13 6.0; FY14 6.0
  - CPI inflation (in percent, annual average): FY08 9.9; FY09 6.7; FY10 7.8; FY11 7.0; FY12 6.0; FY13 5.0; FY14 4.5
  - Central government total revenue: FY08 10.8; FY09 10.4; FY10 10.7; FY11 10.5; FY12 10.6; FY13 10.7; FY14 10.7
  - Tax revenue: FY08 8.8; FY09 8.6; FY10 8.8; FY11 8.8; FY12 8.9; FY13 9.0; FY14 9.0
  - Central government total expenditure: FY08 15.9; FY09 14.1; FY10 14.8; FY11 14.8; FY12 14.9; FY13 14.9; FY14 14.9
  - Annual Development Program (percent of GDP): FY08 3.4; FY09 3.2; FY10 3.3; FY11 3.3; FY12 3.3; FY13 3.3; FY14 3.3
  - Central government overall balance (excl. grants): FY08 -5.1; FY09 -3.7; FY10 -4.0; FY11 -4.3; FY12 -4.2; FY13 -4.2; FY14 -4.1
  - Total central government debt: FY08 46.7; FY09 45.3; FY10 44.0; FY11 44.1; FY12 44.0; FY13 43.8; FY14 43.6
  - External current account balance: FY08 0.9; FY09 2.8; FY10 2.9; FY11 1.4; FY12 0.8; FY13 0.8; FY14 0.8
  - Gross official reserves (in billions of U.S. dollars): FY08 6.1; FY09 7.5; FY10 10.9; FY11 12.3; FY12 13.2; FY13 14.5; FY14 16.2
  - Export growth (in percent): FY08 17.4; FY09 10.1; FY10 3.2; FY11 7.6; FY12 11.1; FY13 13.3; FY14 12.9
  - Import growth (in percent): FY08 25.6; FY09 4.2; FY10 3.5; FY11 11.7; FY12 11.0; FY13 11.5; FY14 11.2
- Risks to baseline:
  - Downside: prolonged global slump affecting exports and remittances (U.A.E. accounts for almost one-fifth of remittances), continued energy shortages deterring investment and FDI.
  - Upside: stronger-than-expected global recovery, jump in private sector investment, accelerated structural reforms.
- Debt sustainability:
  - Staff’s updated DSA suggests low risk of debt distress on external debt metrics; including domestic public debt (21 percent of GDP at end-FY09) raises the risk somewhat.
  - In staff baseline, total public debt to GDP remains around 44 percent of GDP over the medium term.
- Banking sector vulnerabilities:
  - Stress tests indicate vulnerability mainly to deterioration in domestic credit quality; vulnerability to exchange or interest rate movements is low.
  - Increasing bank engagement in stock market could expose some banks to large capital losses if market falls.

### Macroeconomic Policy Discussions
- Policy focus: maintain near-term macro stability by reducing excess liquidity; boost longer-term growth via tax policy reform and higher public investment.

A. Containing Excess Liquidity
- Sources and magnitude of excess liquidity:
  - Unsterilized foreign exchange purchases to defend exchange rate injected liquidity, pushing short-term interest rates substantially below the notional corridor from April onwards and inflating banks’ excess reserves to unprecedented levels.
  - Interest rate capping on lending to priority sectors was used to boost lending.
- Authorities’ response and limitations:
  - BB began mopping up liquidity via BB bills (from August) and reverse repo operations (from mid-October), after reducing reverse repo rate by 200 basis points to 2.5 percent; total liquidity withdrawn remained limited.
  - Reduction in excess liquidity and reserve money occurred largely through large high-cost government borrowing (NSCs, Treasury Bills and Bonds), which led to accumulation of government deposits with BB (example: BB’s net claims on government declined by Tk 40 billion in October).
  - Staff advised that BB would need to issue a sufficiently large amount of BB bills—the main instrument to mop up liquidity—to bring down excess liquidity further if the government began drawing on its deposits with BB.
  - BB signaled readiness to take strong actions to bring excess liquidity down further if inflation and credit demand pick up; government indicated willingness to bear the (quasi-)fiscal costs of needed mopping up operations.
- Policy trade-offs:
  - Bringing excess liquidity down via larger BB bill issuance would raise market interest rates; staff noted this would be a small price to pay to prevent harmful acceleration of inflation.

*IMF staff report based on Bangladesh authorities' data and staff estimates and projections.*

### 17.      There is scope to strengthen the monetary policy framework and stabilize

### There is scope to strengthen the monetary policy framework and stabilize

### Monetary policy framework and systemic liquidity
- Staff proposed moving, in due course, to a standing facility for repo and reverse repo operations and adoption of an interest rate corridor to enhance credibility and predictability of monetary policy.
- The authorities concurred but noted this would have to wait until fully functional open market operations are in place.
- Staff noted that averaging reserve requirements on a two-week maintenance period would help control short-term volatility.

### Cash management (Box 2: Challenges in Cash Management)
- Bangladesh faces cash management challenges on both expenditure and funding sides, raising the government’s interest bill and risking buildup of deposits at BB and commercial banks outside Ministry of Finance control.
- Ministries and Departments retain substantial amounts of cash in commercial bank accounts: "1.1 percent of GDP at the end of FY2009."
- Commercial bank deposits of autonomous and semi-autonomous government bodies amounted to "1.8 percent of GDP at the end of FY2009."
- Retail government savings instruments (NSCs) form a large proportion of outstanding government debt: "8 percent of GDP."
- NSC interest rates are administered and changed only four times in the past ten years; current NSC rates vary from "8½ to 12 percent."
- In the current low inflation and excess liquidity environment, rates on bank deposits and on treasury bills of similar maturity are "400–500 basis points lower" than NSC rates.
- Recent NSC flows: net sales in "Q1 FY2010 of Tk 28 billion"; annual net sales target of "Tk 33 billion" likely to be exceeded.
- Despite large NSC sales, the government mostly adhered to its treasury bill and bond auction calendar, causing a major increase in unremunerated government cash balances with BB.
- No law or rule requires unspent funds held in commercial banks to be swept back into the TSA at fiscal year-end.

### Improving exchange rate management
- Staff view: the taka is somewhat undervalued, though not far out of line with fundamentals.
- Staff recommended allowing a modest nominal appreciation of the taka to:
  - help reduce excess liquidity in the financial system,
  - reduce pressure on monetary policy,
  - help dampen inflation,
  - be unlikely to affect competitiveness of exports given recent sharp nominal depreciation vis-à-vis the euro and the yen.
- Greater exchange rate flexibility would support financial sector development (e.g., encourage a foreign exchange derivatives market) and reduce costly sterilization operations that risk exacerbating vulnerabilities related to rising domestic debt.
- Authorities indicated they would not contemplate greater exchange rate flexibility, concerned that nominal appreciation would add to exporters’ problems.

### Boosting growth through higher capital spending
- Two key constraints preventing sustainable rise in growth-enhancing government spending:
  - Tax-to-GDP ratio stable at around "8.5 percent" for past several years, about "4 percentage points lower" than regional peers at similar development stage.
  - Capacity constraints and governance issues causing chronic under-implementation of the ADP; FY2010 budget envisaged a "56 percent increase in ADP spending" over FY09 outturn but implementation rate has averaged "73 percent over the past 5 years."
- Staff outlined a reform scenario requiring a rise in tax revenue to "11.6 percent" of GDP (still "one percentage point of GDP below the regional average"), implying fundamental changes in income tax and VAT policy.
- Text Table 2 (selected indicators under the reform scenario, values preserved):
  - Real GDP growth (in percent): "6.2 5.9 5.0 6.3 6.9 7.5 8.0" (FY08 FY09 FY10 FY11 FY12 FY13 FY14 as presented)
  - CPI inflation (in percent, annual average): "9.9 6.7 7.8 7.0 6.0 5.8 5.3"
  - Central government total revenue: "10.8 10.4 10.7 11.3 12.0 12.7 13.5"
  - Of which: Tax revenue: "8.8 8.6 8.8 9.4 10.1 10.8 11.6"
  - Central government total expenditure: "15.9 14.0 14.8 15.4 15.9 16.7 17.4"
  - Of which: Annual Development Program: "3.4 3.2 3.3 4.0 4.7 5.7 6.6"
  - Central government overall balance (excl. grants): "-5.1 -3.7 -4.0 -4.1 -4.0 -4.0 -4.0"
  - Total central government debt: "46.7 45.4 44.0 43.8 43.1 42.3 41.3"
  - External current account balance: "0.9 2.8 2.9 1.4 0.5 0.1 -0.5"
  - Gross official reserves (in billions of U.S. dollars): "6.1 7.5 10.9 12.5 13.6 14.6 15.5"
  - Export growth (in percent): "17.4 10.1 3.2 11.9 15.5 15.9 15.4"
  - Import growth (in percent): "25.6 4.2 3.5 14.6 14.6 14.8 14.7"

### Risks to fiscal sustainability and financing
- Staff warned escalating foreign borrowing, especially non-concessional loans, could weaken external debt position; foreign donors may not meet increasing borrowing demand.
- Despite large budget support from the ADB, there may be a shortfall in net external financing in FY2010.
- Financing higher capital spending domestically from high-cost NSCs could quickly undermine fiscal sustainability by raising the interest bill and the overall fiscal deficit.
- Authorities committed to VAT legislation submission in the context of the FY2011 budget, prioritizing higher ADP implementation and commencing Public Private Partnerships (PPPs) in the FY2010 budget.

### Reforms of energy prices and SOEs
- Energy and fertilizer subsidies look set to rise again as domestic petroleum product and electricity prices are below levels needed to cover SOE input costs.
- Staff recommends early and more frequent adjustment of retail energy prices combined with targeted compensation for the poor to prevent accumulation of large losses and avoid a large future price adjustment.
- Reducing infrastructure bottlenecks (including oil-import facilities) can substantially reduce transportation and distribution costs, lessening the need to raise retail prices.

### Financial sector reforms
- Financial sector reform is key for growth; July 2009 FSAP Update found considerable progress since 2003 FSAP but asset quality remains weak with a large share of loans classified substandard, doubtful, and loss.
- Weak state of SCBs remains a concern; three large SCBs corporatized in 2007, brought under BB regulatory authority, with improved but still weak finances relative to private banks.
- Staff recommendations and oversight:
  - Provide strategic guidance and robust, business-principled decisions at Board and management levels for SCBs.
  - BB should closely monitor the three corporatized SCBs using agreed verifiable indicators and take corrective supervisory measures if banks are not run appropriately.
  - Rupali Bank, the weakest of the four major SCBs, should be brought under the same restructuring and monitoring program as the other three SCBs as quickly as possible.
- Authorities’ reported measures and progress:
  - Preparing for introduction of Basel II regulations effective "January 1, 2010."
  - Raising the quality of banks’ capital; creating risk management units at all banks; strengthening BB’s in-house capacity for stress testing; requesting commercial banks to run merchant banking business through separately formed subsidiaries; engaging a resident advisor to assist BB supervisory capacity.
- Accounting and regulatory issues:
  - Weak implementation of accounting standards appears to overestimate decline in NPL ratio and allowed “paper” recapitalizations of some SCBs.
  - Need to improve prudential and regulatory enforcement to bring all microcredit and NBFIs fully within the regulatory perimeter.
- Market efficiency measures:
  - Non-prudential interventions (ceiling on lending rates for priority sectors, moral suasion, directed lending, easing debt service) are counterproductive long-term; staff welcomes BB’s pronouncement that the ceilings on lending rates are temporary and recommends removal of such interventions as soon as possible.
  - High fixed interest rates on NSCs burden the budget and distort monetary transmission; increased interest rate flexibility would make government securities auctions more efficient, eliminate devolvement onto primary dealers at unhelpful rates, facilitate a more active secondary market, help financial deepening and monetary policy implementation, and reduce borrowing costs.

### Improving statistics
- Priorities to strengthen policymaking: improve trade statistics; adopt a Statistics Act to clarify responsibilities and provide autonomy to the Bangladesh Bureau of Statistics (BBS); improve and update source data for national accounts; move towards Government Financial Statistics Manual 2001 standards for fiscal statistics; ensure BBS has sufficient staff and resources.

### Staff appraisal (summary)
- Bangladesh’s economy performed robustly despite the global recession, supported by domestic activity in agriculture and services, resilient exports, and strong remittances; fiscal conservatism contributed to resilience.
- Staff’s baseline projects medium-term growth at "6 percent."
- Immediate priority: prevent an increase in inflation. Staff notes monetary policy has been too accommodative given exchange rate stabilization amid strong remittance inflows and calls for preemptive and bold action by BB; higher market interest rates would be justified to prevent harmful inflation acceleration.
- Staff reiterates that greater exchange rate flexibility would support monetary policy objectives, deepen the foreign exchange market, and is sustainable given the staff view that the taka is somewhat undervalued.
- Medium-term priority: unleash Bangladesh’s potential while maintaining fiscal prudence and sustainability. Pushing through VAT reforms and raising revenue to enable higher capital spending are crucial to escape a low revenue–low capital spending equilibrium and to address infrastructure bottlenecks.

*IMF staff summary based on the provided chapter content.*

### 36.      Further financial deepening is needed to allow Bangladesh to achieve its growth

### 36.      Further financial deepening is needed to allow Bangladesh to achieve its growth potential

### Financial sector and interest rate policy
- Ceilings on lending rates and other non-prudential interventions should be removed as soon as possible.
- Increased flexibility of interest rates, including for NSCs, would make the auction process for government paper more efficient and give impetus to an active secondary market.
- Increased interest rate flexibility would also help offset the government’s higher interest costs related to the needed monetary tightening.
- Restructuring of SCBs must be accelerated.

### Statistics and data quality
- Continued improvement in the quality and timeliness of statistics would improve policy making.
- Improvements in national account statistics are particularly urgent.

### Exchange restriction on nonresident taka accounts
- As there is no timetable for the removal of the one remaining exchange restriction on the transferability of funds in nonresident taka accounts, staff does not recommend its approval by the Board.

*IMF staff report excerpt.*

### 39.      It is recommended that the next Article IV consultation with Bangladesh take

### _cr1055 - 39.      It is recommended that the next Article IV consultation with Bangladesh take

### Recommendation
- It is recommended that the next Article IV consultation with Bangladesh take place on the standard 12-month cycle.

### Real and Fiscal Sector: recent developments (FY2001–09)
- Growth: Real GDP growth and contributions by sub-sectors shown for 00/01–08/09; headline Real GDP contributions include Services, Industry, Agriculture (figures presented in chart form).
- Inflation: "Inflation eased rapidly since the onset of the global crisis in September 2008." Consumer Price Inflation (12-month percent changes) reported as General, Food, Non-food (charted for 00/01–08/09).
- Government revenue: "Government revenue remains low." Central Government Revenue composition (In percent of GDP): Income and profit taxes; Taxes on imports; Indirect domestic taxes; Nontaxes (charts for 00/01–08/09).
- Government expenditure: "With an upward drift in current spending..." Central Government Expenditure (In percent of GDP): ADP; Other capital and Net lending; Transfers and subsidies; Other current (charts for 00/01–08/09).
- Fiscal financing: "...and lower foreign financing, domestic bank financing reached a multi-year high." Central Government Overall Deficit (Including grants, in percent of GDP) financing composition: Domestic nonbank financing; Domestic bank financing; External financing (charts for 00/01–08/09).
- Bangladesh Petroleum Corp. (BPC): "Lower international oil prices allowed BPC to reduce its losses in FY2009." BPC annual losses shown (In percent of GDP) for FY05–FY09 with Diesel Selling Price and Diesel break even price (Taka per Liter, RHS).

### Monetary and External Sector: recent developments (FY2001–09)
- Monetary aggregates: "Reserve money is accelerating. Private credit slowed after the onset of the crisis...but remains the main driver of M2 growth." Charts show Reserve money, Broad money, Private sector credit (00/01–08/09).
- Contributions to Broad Money Growth: components include NFA, Net credit to government, Private sector credit, Reserve money (00/01–08/09).
- Exchange rate and competitiveness: "The taka/US$-rate has been stable; the REER is now 9 percent higher than in 2007." Exchange Rates (Dec.2000 =100) charted as NEER, REER, US$/Taka (00/01–08/09).
- External flows: "Imports declined; exports held up better." Exports and Imports (3mma, 12-month percent change) charted (00/01–08/09).
- Remittances and aid: "Remittances have continued to surge but external assistance declined in FY09. The narrower trade deficit and higher remittances contributed to higher reserves." Workers' Remittances and Aid Inflows (In percent of GDP) charted; Balance of Payments (In percent of GDP) and Reserves (in months of imports) charted (00/01–08/09).
- Sources: Data provided by the Bangladesh authorities; IMF, Information Notice System, International Financial Statistics; and Fund staff estimates and projections. Note: 1/ Projection for 08/09.

### Money and Foreign Exchange Markets: recent developments
- Exchange market pressure: "Appreciation pressure on the taka remains substantial." Exchange Market Pressure Index and components (Exchange Rate Appreciation; Reserve Accumulation net of valuation effects) charted for 06/05–06/09.
- Banks' net open forex position: "Banks' net open position limits were relaxed in September." Commercial Banks' Net Open Forex Position (in millions of dollars) charted for 06/05–06/09.
- Liquidity and interest rates: "The liquidity injection from unsterilized interventions has boosted banks' liquidity...and pushed short-term interest rates down, as BB discontinued its repo/reverse repo monetary policy framework over the summer." Commercial Banks' Average Excess Reserves (in billions of Taka) and Interest Rates (Call Rate, Repo Rate, 91-day T Bill rate, Reverse Repo Rate, in percent) charted for 06/05–06/09.
- Credit conditions: "Lending rates have started to ease but the spread has shown little movement. Private sector credit is picking up rapidly." Commercial Lending Rate, Deposit Rate, Spread charted (06/05–06/09). Increase in stock of private sector credit (in Tk bn) shown by month series for FY08, FY09, FY10.

### Key economy snapshot and projections (Table 1: Key Economic Indicators, FY2007–14)
- Nominal GDP (FY09): US$89 billion
- Main export (percent of total): garments and textiles (79)
- Population (FY08): 142.5 million
- FDI (percent of GDP, FY09): US$941 million (1.0)
- GDP per capita (FY08): US$554
- Government debt: 45.4 percent of GDP
- Poverty rate (FY05): 40.8 percent
- Foreign government debt: 53 percent of total debt

Selected historical and projected series (percent change or percent of GDP as presented):
- Real GDP: FY07 6.4; FY08 6.2; FY09 5.9; FY10 5.0; FY11 5.8; FY12 6.0; FY13 6.0; FY14 6.0
- GDP deflator: FY07 6.8; FY08 8.0; FY09 6.4; FY10 6.4; FY11 6.0; FY12 5.0; FY13 5.0; FY14 4.5
- CPI inflation (annual average): FY07 7.2; FY08 9.9; FY09 6.7; FY10 7.8; FY11 7.0; FY12 6.0; FY13 5.0; FY14 4.5
- CPI inflation (end of period): FY07 9.2; FY08 10.0; FY09 2.2; FY10 10.0; FY11 7.2; FY12 5.0; FY13 5.0; FY14 4.0
- Gross investment (percent of GDP): FY07 24.5; FY08 24.2; FY09 23.3; FY10 24.2; FY11 24.4; FY12 24.6; FY13 24.8; FY14 25.4
- National savings (percent of GDP): FY07 25.9; FY08 25.1; FY09 26.2; FY10 27.1; FY11 25.8; FY12 25.4; FY13 25.6; FY14 26.2
- Total revenue (percent of GDP): FY07 10.2; FY08 10.8; FY09 10.4; FY10 10.7; FY11 10.5; FY12 10.6; FY13 10.7; FY14 10.7
- Total expenditure (percent of GDP): FY07 13.4; FY08 15.9; FY09 14.1; FY10 14.8; FY11 14.8; FY12 14.9; FY13 14.9; FY14 14.9
- Overall balance (excluding grants, percent of GDP): FY07 -3.2; FY08 -5.1; FY09 -3.7; FY10 -4.0; FY11 -4.3; FY12 -4.2; FY13 -4.2; FY14 -4.1
- Total central government debt (percent of GDP): FY07 48.8; FY08 46.7; FY09 45.3; FY10 44.0; FY11 44.1; FY12 44.0; FY13 43.8; FY14 43.6
- Credit to private sector (end of fiscal year; percent change): FY07 15.1; FY08 25.1; FY09 14.6; FY10 15.7; FY11 16.6; FY12 16.6; FY13 17.1; FY14 17.2
- Broad money (M2) (end of fiscal year; percent change): FY07 17.1; FY08 17.6; FY09 19.2; FY10 18.8; FY11 17.2; FY12 16.6; FY13 16.4; FY14 16.2
- Exports (annual percent change): FY07 15.8; FY08 17.4; FY09 10.1; FY10 3.2; FY11 7.6; FY12 11.1; FY13 13.3; FY14 12.9
- Imports (annual percent change): FY07 16.6; FY08 25.6; FY09 4.2; FY10 3.5; FY11 11.7; FY12 11.0; FY13 11.5; FY14 11.2
- Current account (percent of GDP): FY07 1.4; FY08 0.9; FY09 2.8; FY10 2.9; FY11 1.4; FY12 0.8; FY13 0.8; FY14 0.8
- Gross official reserves (in billions of U.S. dollars): FY07 5.1; FY08 6.1; FY09 7.5; FY10 10.9; FY11 12.3; FY12 13.2; FY13 14.5; FY14 16.2
- Reserves (in months of imports of goods and services): FY07 2.7; FY08 3.1; FY09 3.6; FY10 4.7; FY11 4.8; FY12 4.6; FY13 4.6; FY14 4.6
- Nominal GDP (in millions of U.S. dollars): FY07 68,420; FY08 79,561; FY09 89,385; FY10 99,526; FY11 107,248; FY12 113,867; FY13 122,045; FY14 130,811

Sources: Data provided by the Bangladesh authorities; and Fund staff estimates and projections. Note: 1/ Fiscal year begins July 1.

### Balance of Payments (Table 2: FY07–14, in millions of U.S. dollars unless otherwise indicated)
- Trade balance: FY07 -3,459; FY08 -5,330; FY09 -4,708; FY10 -4,927; FY11 -6,170; FY12 -6,829; FY13 -7,255; FY14 -7,709
- Exports (f.o.b.): FY07 12,053; FY08 14,151; FY09 15,583; FY10 16,076; FY11 17,296; FY12 19,213; FY13 21,772; FY14 24,580
  - RMG sector exports: FY07 9,211; FY08 10,700; FY09 12,348; FY10 12,780; FY11 13,675; FY12 15,179; FY13 17,152; FY14 19,211
- Imports (f.o.b.): FY07 -15,511; FY08 -19,481; FY09 -20,291; FY10 -21,003; FY11 -23,466; FY12 -26,042; FY13 -29,026; FY14 -32,289
  - Crude oil and petroleum products imports: FY07 -2,018; FY08 -2,480; FY09 -2,581; FY10 -2,918; FY11 -3,185; FY12 -3,470; FY13 -3,764; FY14 -4,024
- Services: FY07 -1,255; FY08 -1,525; FY09 -1,621; FY10 -1,909; FY11 -2,254; FY12 -2,647; FY13 -3,111; FY14 -3,598
- Income: FY07 -884; FY08 -994; FY09 -1,361; FY10 -1,350; FY11 -1,477; FY12 -1,570; FY13 -1,680; FY14 -1,802
- Transfers: FY07 6,554; FY08 8,551; FY09 10,226; FY10 11,057; FY11 11,400; FY12 11,969; FY13 13,018; FY14 14,161
  - Private transfers: FY07 6,457; FY08 8,402; FY09 10,154; FY10 10,966; FY11 11,305; FY12 11,871; FY13 12,917; FY14 14,056
  - Workers' remittances: FY07 5,979; FY08 7,915; FY09 9,689; FY10 10,464; FY11 10,778; FY12 11,317; FY13 12,335; FY14 13,446
- Current account balance: FY07 957; FY08 702; FY09 2,536; FY10 2,870; FY11 1,500; FY12 922; FY13 973; FY14 1,052
- Capital and financial account balance: FY07 360; FY08 -371; FY09 -478; FY10 -123; FY11 -432; FY12 374; FY13 717; FY14 735
- Foreign direct investment: FY07 760; FY08 748; FY09 941; FY10 700; FY11 764; FY12 828; FY13 906; FY14 1,000
- Gross official reserves (in millions of U.S. dollars): FY07 5,077; FY08 6,149; FY09 7,471; FY10 10,905; FY11 12,279; FY12 13,242; FY13 14,510; FY14 16,214
  - In months of imports of goods and services: FY07 2.7; FY08 3.1; FY09 3.6; FY10 4.7; FY11 4.8; FY12 4.6; FY13 4.6; FY14 4.6
- Net international reserves (in millions of U.S. dollars): FY07 3,538; FY08 4,013; FY09 5,345; FY10 8,092; FY11 9,549; FY12 10,708; FY13 12,152; FY14 13,939
- Memorandum: Nominal GDP (in millions of U.S. dollars): FY07 68,420; FY08 79,561; FY09 89,385; FY10 99,526; FY11 107,248; FY12 113,867; FY13 122,045; FY14 130,811

Sources: Data provided by the Bangladesh authorities; and Fund staff estimates and projections. Note: 1/ Fiscal year begins July 1.

### Central Government Operations (Table 3: FY2007–2014)
- Total Revenue and Grants (in billions of taka): FY07 511; FY08 615; FY09 757; FY10 741; FY11 682; FY12 846; FY13 785; FY14 862; FY15 (proj.) 970; FY16 1,083; FY17 1,206 (table continues with detailed years and items).
- Total revenue (percent of GDP): FY07 10.2; FY08 10.8; FY09 11.3; FY10 11.2; FY11 10.4; FY12 11.6; FY13 10.7; FY14 10.5; FY15 10.6; FY16 10.7; FY17 10.7
- Tax revenue (percent of GDP): FY07 8.2; FY08 8.8; FY09 8.6; FY10 8.8; FY11 8.8; FY12 9.3; FY13 8.8; FY14 8.8; FY15 8.9; FY16 9.0; FY17 9.0
- Total expenditure (percent of GDP): FY07 13.4; FY08 15.9; FY09 16.3; FY10 15.3; FY11 14.1; FY12 16.6; FY13 14.8; FY14 14.8; FY15 14.9; FY16 14.9; FY17 14.9
- Overall balance (including grants, percent of GDP): FY07 -2.6; FY08 -4.6; FY09 -3.9; FY10 -3.3; FY11 -3.0; FY12 -4.3; FY13 -3.4; FY14 -3.6; FY15 -3.5; FY16 -3.5; FY17 -3.4
- Overall balance (excluding grants, percent of GDP): FY07 -3.2; FY08 -5.1; FY09 -5.0; FY10 -4.1; FY11 -3.7; FY12 -5.0; FY13 -4.0; FY14 -4.3; FY15 -4.2; FY16 -4.2; FY17 -4.1
- Financing (net) (percent of GDP): FY07 2.6; FY08 4.6; FY09 3.9; FY10 3.3; FY11 3.0; FY12 4.3; FY13 3.4; FY14 3.6; FY15 3.5; FY16 3.5; FY17 3.4
- Memorandum: Nominal GDP (in billions of taka) FY07 4,725; FY08 5,458; FY09 6,149; subsequent years provided.

Sources: Data provided by the Bangladesh authorities; and Fund staff estimates and projections. Note: 1/ Fiscal year begins July 1. Cash basis unless otherwise specified.

### Central Bank Balance Sheet and Monetary Survey (Tables 4–5: June 2007–June 2010)
- Central Bank balance sheet snapshots include Net international reserves, Net domestic assets, Net credit to central government, Credit to deposit money banks, Reserve money, Currency, Reserves, exchange rate end-of-period (taka/dollar) and Nominal GDP (in billions of taka). Examples: Reserve money (Jun-07) 394; (Jun-08) 476; (Mar-09) 547; (Jun-09) 549; (Sep-09) 533; (Jun-10 proj.) 627.
- Monetary survey highlights: Net foreign assets (Jun-07) 326; (Jun-08) 371; (Mar-09) 373; (Jun-09) 347; (Sep-09) 376; (Jun-10 proj.) 475. Broad money (M2) (Jun-07) 2,114; (Jun-08) 2,487; (Mar-09) 2,668; (Jun-09) 2,719; (Sep-09) 2,782; (Jun-10 proj.) 2,964.
- Year-on-year percent changes: Reserve money year-on-year percent change examples: Sep-08 16.2; Dec-08 0.6 (charts and table entries provided). Broad money (M2) year-on-year percent change examples: Jun-07 17.1; Jun-08 17.6; Mar-09 23.5; Jun-09 17.9; Sep-09 19.8; Jun-10 proj. 19.2.
- Memorandum items: Broad money multiplier examples: 5.4 (Jun-07); 5.2 (Jun-08); 4.9 (Mar-09); 5.0 (Jun-09); 5.2 (Sep-09); 4.7 (Jun-10 proj.). Net domestic financing since beginning of FY examples: 9,114 (flow units as in table).

Sources: Data provided by the Bangladesh authorities; and Fund staff estimates and projections.

### Financial Soundness Indicators (Table 6)
- Capital adequacy: Regulatory capital to risk-weighted assets: 2004 6.9; 2005 7.3; 2006 5.1; 2007 7.4; 2008 10.1
  - State-owned commercial banks (BB): 7.9; 7.9; 8.0; 1.9; 2.4
  - Private commercial banks: 6.9; 6.6; 6.7; 7.8; 8.6
  - Foreign commercial banks: 20.3; 20.6; 19.7; 17.8; 19.2
- Asset quality: Non-performing loans to total loans: 2004 17.5; 2005 13.2; 2006 12.8; 2007 14.5; 2008 11.2
  - State-owned commercial banks: 8.6; 8.9; 22.8; 29.0; 28.0
  - Private commercial banks: 7.4; 5.1; 4.9; 5.4; 5.1
- Provisioning: Loan provisions to total non-performing loans: 26.8; 28.3; 45.2; 43.0; 50.1
- Profitability: Return on equity: 2004 -12.1; 2005 12.1; 2006 -37.3; 2007 18.7; 2008 20.3
  - Return on assets: 2004 -0.5; 2005 0.6; 2006 -1.2; 2007 0.9; 2008 1.3
- Sensitivity to market risk: Net open position in foreign exchange to capital: 20.3; 15.2; 31.5; 21.5; 14.7
- Composition of credit (percent of total): Industry (other) 33.4; 31.3; 32.2; 34.5; 36.0; Trade 24.5; 22.6; 22.1; 24.3; 24.0; Agriculture 9.8; 9.0; 8.2; 7.7; 6.8

Sources: Bangladesh Bank; and Fund staff estimates.

### Joint IMF/World Bank Debt Sustainability Analysis (December 23, 2009)
- Finding: "Bangladesh’s risk of debt distress is low based on external debt indicators."
- Evidence: "Bangladesh’s external debt burden indicators do not breach the relevant policy-dependent indicative thresholds under the baseline scenario and also do not breach the thresholds under the stress tests."
- Caveat: "Debt burden indicators are significantly worse when domestic debt is included. Accordingly, this analysis reveals a more elevated risk of debt distress on public debt compared to results based solely on external debt."
- Policy monitoring: "Staffs will continue to monitor closely the evolution of domestic debt and the government’s ability to mobilize domestic resources, especially tax revenues."

*Prepared by the Staffs of the International Monetary Fund and the International Development Association; Sources: Data provided by the Bangladesh authorities; IMF, Information Notice System; International Financial Statistics; Bangladesh Bank; Fund staff estimates and projections.*

### 1. The results of this DSA are similar to those of the previous DSA.

### _cr1055 - 1. The results of this DSA are similar to those of the previous DSA.

### Key differences vs. previous DSA
- The primary difference is that whereas in the previous DSA one of the thresholds was marginally breached in the most extreme stress test, this is not the case in the current DSA.
- Baseline assumptions for economic growth are more conservative than in the previous DSA.
- Projected rate of external debt accumulation is somewhat lower.
- Discount rate reduced from 5 percent to 4 percent, raising the NPV of external debt across the board.

### Macroeconomic framework underlying the DSA (Box 1)
- Real GDP growth:
  - Medium term projected at 6 percent.
  - Long run assumed to average 6¼ percent.
  - 10-year average noted as 5.8 percent.
- Inflation (GDP deflator in domestic currency):
  - Decelerates from 6.4 percent in FY09 to 4.5 percent in FY14.
- Growth of exports and imports of goods and services:
  - Exports: 12½ percent (medium term).
  - Imports: 12 percent (medium term).
- Remittances:
  - Projected to increase by 9 percent per annum.
  - Noted historical increase from about 8 percent of GDP in FY06 to almost 11 percent of GDP in FY09.
- Current account (including grants): continues to show a surplus under baseline.
- Net aid inflows (disbursements of grants and loans net of amortization):
  - About 1.3 percent of GDP in the medium and long term.
  - FY08: 1.9 percent of GDP.
  - FY2010: 1.5 percent of GDP (including ADB budget support of ¾ percent of GDP).
- Amortization payments:
  - About US$720 million in FY2010.
  - Rise to US$850 million in FY14.
  - US$580 million in FY08.
- Grant element of new external borrowing: assumed about 30 percent.
- Primary fiscal deficit (including grants): assumed to average 1 percent of GDP over the medium term.
- Domestic revenue: projected to remain below 11 percent of GDP over the medium term.
- Real interest rates on domestic currency government debt: assumed to average about 6 percent in the medium term.

### External debt sustainability findings
- All external debt indicators remain well below policy-dependent thresholds under the baseline scenario.
- No thresholds are breached under standardized stress tests.
- External debt stock:
  - External debt equivalent to 24 percent of GDP at end of FY2009.
  - Down from 27 percent of GDP at end of FY2007.
- Baseline 20-year projection highlights:
  - NPV of external debt-to-GDP:
    - Decreases from about 20 percent in 2009 to less than 10 percent during the projection period.
    - Indicative threshold: 40 percent.
  - NPV of external debt-to-exports:
    - Decreases from 99 percent in 2009 to 25 percent.
    - Indicative threshold: 150 percent.
  - Debt service ratio:
    - Decreases from 6 percent in 2010 to 2½ percent.
    - Indicative threshold: 20 percent.
- Stress tests:
  - Standard stress tests do not reveal serious vulnerabilities.
  - NPV of debt-to-revenues threshold is almost breached in the most extreme test where net non-debt creating flows are at historical average minus one standard deviation in 2011-12.
- Role of remittances:
  - Strong increase improves capacity to repay beyond what DSA framework recognizes.
  - Remittances considered a relatively stable source of foreign inflows reducing vulnerabilities.

### Public debt sustainability analysis
- Domestic debt:
  - Rising modestly from 20 percent of GDP in FY06 and FY07 to 21.2 percent of GDP in FY09.
  - Instrument composition (end-FY09, in percent of total):
    - Treasury Bills and Treasury Bonds: 39 percent.
    - National Savings Certificates: 38 percent.
    - Other (including overdrafts from BB): 23 percent.
  - Bangladesh Bank holds more than 20 percent of government’s domestic debt; devolved treasury bills and bonds equal 0.6 percent of GDP at end-FY09.
  - Government deposit balances with commercial banks: Tk 183 billion or 3 percent of GDP at end-FY2009 (up from Tk 122 billion or 2.6 percent of GDP at end-FY2007). Net domestic government debt about 18.2 percent of GDP at end-FY2009.
- Baseline public debt projections:
  - NPV of public debt-to-GDP remains steady at about 40 percent of GDP through FY2015, declines to 37 percent of GDP in FY2030.
  - NPV of public debt-to-domestic revenue follows similar trend: broadly steady between FY2010 and FY2015, gradually declining in long run.
- Alternative scenarios and bound tests:
  - Debt indicators are sensitive to alternative assumptions and show sizeable risks.
  - Example scenario: one-off debt creating flow of 10 percent of GDP (to securitize contingent liabilities) raises debt service to revenue ratio to 36 percent in FY2015 versus baseline 28 percent.
- Fiscal and contingent liability risks:
  - Subsidies to loss-making state-owned enterprises largely on budget, reducing risk.
  - Energy and imported fertilizer remain underpriced; a rise in world prices could create contingent liabilities without automatic price adjustment mechanisms.
- Annual Development Program (ADP) implementation:
  - Baseline assumes continued under-implementation.
  - Full implementation in FY2010 could raise overall fiscal deficit by more than one percent of GDP.
  - ADP largely financed by concessional external financing; full implementation likely to entail additional concessional external financing and possible additional domestic debt issuance, some carrying interest rates of 12 percent, which would put public debt and debt service ratios on higher paths.

### Debt management
- A joint Bank/Fund mission visited Bangladesh in November 2009 to provide technical assistance and develop a reform plan for debt management functions and operations, building on earlier MTDS and DeMPA work.
- Key recommendations from the November 2009 mission focused on:
  - Improving institutional arrangements for managing total public sector debt, and better integrating domestic debt in the debt recording system.
  - Developing capacity and procedures for improved cash balance management and cash-flow forecasting.
  - Reducing operational risks by addressing deficiencies in recording and reconciliation of data.

### Conclusions and policy recommendations
- Staff view: Bangladesh should be considered at low risk of debt distress based on external indicators, but elevated risk on public debt.
- Drivers of concern:
  - Continued low domestic revenue base.
  - Substantial increase in debt ratios when domestic debt is included.
- Policy priorities:
  - Mobilize domestic revenues.
  - Appropriately manage contingent liabilities.
  - Continue prudent management of expenditures while protecting priority spending.
  - Improve management of existing debt and careful oversight of new debt accumulation to ensure improvement in debt indicators.

*Staff assessment based on the joint World Bank and IMF DSA prepared using the LIC DSF and macroeconomic data gathered in IMF missions to Dhaka in 2009.*

### 13. The staff encourages the authorities to build on recent steps and move forward

### 13. The staff encourages the authorities to build on recent steps and move forward

### Debt management capacity — key recommendation
- The staff encourages the authorities to build on recent steps and move forward as quickly as possible to strengthen debt management capacity.
- Priority action: continue developing a comprehensive public debt database which covers both domestic and external debt.
- Priority action: integrate that database with centralized reporting of all external aid flows.

### Stress-test and scenario findings (external PPG debt indicators)
- The most extreme stress test is defined as the test that yields the highest ratio in 2020; in the figures presented the most extreme shock corresponds to a Non-debt flows shock for figures a, b, c, d, e, and f.
- The large rate of debt accumulation in FY2010 compared to later years reflects large program loans from the AsDB (almost 0.8 percent of GDP) disbursed in November 2009.

### Selected projections and macro assumptions (examples drawn from the sustainability framework)
- Grant-equivalent financing (in percent of GDP) projections: 0.9, 1.0, 1.1, 1.1, 1.1, 1.1, 1.0, 1.0, 1.0 (years implied in the table).
- Aid flows (in Billions of US dollars) examples: 0.7, 0.5, 0.9, 0.9, 1.4, 1.5, 1.6, 1.8, 1.9, 2.6, 5.0; o/w Grants examples: 0.4, 0.4, 0.6, 0.7, 0.7, 0.8, 0.8, 0.9, 1.0, 1.4, 2.7; o/w Concessional loans examples: 0.3, 0.2, 0.2, 0.2, 0.7, 0.7, 0.8, 0.9, 0.9, 1.2, 2.3.
- Key macroeconomic assumptions (examples): Real GDP growth (in percent) series includes 6.4, 6.2, 5.9, 5.8, 0.7, 5.0, 5.8, 6.0, 6.0, 6.0, 6.0, 5.8, 6.3, 6.3, 6.3.
- Effective interest rate (percent) examples: 0.9, 1.1, 0.9, 1.1, 0.1, 1.3, 1.4, 1.4, 1.5, 1.6, 1.6, 1.5, 1.9, 2.2, 2.0.
- Growth of exports of G&S (US dollar terms, in percent) examples: 18.0, 15.2, 9.0, 11.5, 7.2, 2.9, 7.3, 10.3, 12.4, 12.2, 12.5, 9.6, 11.7, 10.3, 11.2.
- Growth of imports of G&S (US dollar terms, in percent) examples: 19.8, 22.4, 3.4, 11.2, 9.6, 4.2, 11.7, 11.0, 11.5, 11.2, 11.8, 10.2, 10.9, 10.4, 10.6.

### Public debt dynamics and indicators — selected items
- PV of PPG external debt (in percent of exports) example values: 99.0, 101.4, 99.7, 92.1, 83.9, 77.1, 71.0, 48.1, 24.9 (selected years in the projection).
- PV of PPG external debt (in percent of government revenues) example values: 185.3, 169.9, 169.7, 161.3, 153.5, 146.9, 140.9, 112.2, 76.7 (selected years in the projection).
- PPG debt service-to-revenue ratio (in percent) example values: 9.8, 8.6, 7.9, 9.6, 9.7, 10.7, 10.3, 9.2, 8.7, 8.7, 6.7 (selected years in the projection).
- Public sector debt (percent of GDP) example series: 46.8, 46.8, 45.3, 43.8, 44.0, 43.7, 43.3, 43.1, 42.8, 41.8, 40.0 (historical and projection snapshots).
- Gross financing need (percent of GDP) examples: 3.4, 5.3, 3.6, 4.1, 4.3, 4.4, 4.4, 4.2, 4.1, 4.2, 4.0.

### Stress and sensitivity analysis — scenarios summarized
- Alternative scenarios and bound tests shown include:
  - A1. Key variables at their historical averages in 2010-2030.
  - A2. New public sector loans on less favorable terms in 2010-2030 (assumes interest rate on new borrowing is 2 percentage points higher than baseline).
  - B1–B6. Bound tests including shocks to real GDP growth, export value growth, US dollar GDP deflator, net non-debt creating flows, combinations of shocks, and a one-time 30 percent nominal depreciation in 2011.
- Selected sensitivity results (examples): PV of debt-to-GDP ratio baseline values include 18, 18, 17, 16, 16, 15, 12, 9 across selected years; PV of debt-to-exports ratio baseline values include 101, 100, 92, 84, 77, 71, 48, 25 across selected years; PV of debt-to-revenue ratio baseline values include 170, 170, 161, 153, 147, 141, 112, 77 across selected years.

### Implementation implications
- Strengthening debt management capacity will improve monitoring of public and publicly guaranteed external debt, better assessment of debt sustainability under alternative scenarios (including Non-debt flows shocks), and integration of external aid reporting.
- Timely creation and integration of a comprehensive debt database will support stress testing (including the most extreme shock identification) and fiscal planning given large episodic disbursements (e.g., AsDB program loans almost 0.8 percent of GDP in FY2010).

*Source: IMF staff report excerpts and associated tables and figures.*

### ANNEX II.  B

### ANNEX II.  B — ANGLADESH: RELATIONS WITH THE WORLD BANK GROUP

### Overview of the World Bank Group program
- The World Bank Group Program in Bangladesh consists of an integrated package of financial assistance including concessional IDA credits and IFC investments, along with complementary analytical and advisory services.
- Collaboration and coordination between the IMF and the World Bank on Bangladesh was described in last year’s Article IV staff report.

### IDA engagement and Country Assistance Strategy (CAS)
- Bangladesh is among the largest recipients of financial assistance from IDA.
- IDA’s engagement in Bangladesh is guided by its Country Assistance Strategy which was discussed and endorsed the Bank’s Board of Executive Director’s in April 2006.
- The CAS supports a program of technical and financial assistance aimed at: (i) improving the investment climate and (ii) empowering the poor.
- Cutting across both these goals was a focus on improving governance.
- During the CAS period, in line with its objectives, IDA committed US$2.69 billion, of which:
  - around 40 percent went for improving the investment climate by strengthening infrastructure (energy, roads, transportation, water and sanitation),
  - 17 percent for empowering the poor by improving the delivery of education and health services,
  - and 25 percent for strengthening governance.

### IFC activities and private sector support
- IFC provides direct support to the private sector in Bangladesh, with an emphasis on:
  - (i) private infrastructure;
  - (ii) energy, including investments in gas production and related infrastructure;
  - (iii) manufacturing and service sector companies;
  - (iv) innovative private sector sponsored projects in health and education.
- IFC is supporting the development of local capital markets and a competitive banking sector through direct investments and institution building.
- To promote SME development:
  - IFC’s regional SME Facility, the South Asia Enterprise Development Facility (SEDF), will continue to provide technical assistance to financial intermediaries, SMEs and the professional service firms that support these SMEs.
  - A separate facility, the Bangladesh Investment Climate Facility (BICF), launched in 2007, will assist the Government of Bangladesh to reforms its Investment Climate.

### Forward-looking CAS (FY10-14) priorities
- A new CAS is being prepared for Bangladesh covering (FY10-14). It will be aligned with the Poverty Reduction Strategy (PRS) II that is currently being finalized by the government.
- The new CAS will build on the World Bank Group’s work in Bangladesh so far and also help the government deal with some emerging challenges.
- The CAS is expected to focus on:
  - Increased resilience to climate change impact.
  - Improved Human Development and Social Protection.
  - Improved Environment for Private Sector Investment and Growth.
- The CAS will also continue to focus on improving governance as a cross cutting issue given the important role it plays in strengthening service delivery.

- Prepared by World Bank staff. Contact person: Ms. Moorty, Senior Economist, (SASEP).

*ANNEX II. B — ANGLADESH: RELATIONS WITH THE WORLD BANK GROUP — source: _cr1055 - ANNEX II. B*

### Annex V. Bangladesh: Millennium Development Goals, 1990

### Annex V. Bangladesh: Millennium Development Goals, 1990–2008

### Background and context
- On January 5, 2010, the Executive Board of the International Monetary Fund (IMF) concluded the 2009 Article IV consultation with Bangladesh.
- Bangladesh’s economy “held up remarkably well” despite the global recession, supported by low financial integration, resilient exports (large share of basic textiles and garments), and strong remittances.
- Growth for FY2009 (July 2008–June 2009) was estimated at 5.9 percent.

### External position and reserves
- Current account recorded a surplus of almost 3 percent of GDP in FY2009, up from less than 1 percent of GDP in FY2008.
- Gross international reserves rose substantially during FY09, aided by an SDR allocation from the IMF (US$0.7 billion) and Asian Development Bank disbursements (US$0.6 billion).
- Gross international reserves exceeded US$10 billion in November (FY09), almost double the level in November 2008 — equivalent to 4.8 months of prospective imports, a 15-year high.
- Staff expectation: strong inflows of remittances expected to continue and gross international reserves should remain above a relatively comfortable 4 months of prospective imports.

### Monetary policy, liquidity, and inflation pressures
- Bangladesh Bank (BB) countered upward pressure on the taka through unsterilized foreign exchange purchases, causing banks’ excess reserves to rise sharply and short-term interest rates to fall below 1 percent.
- With no absorption measures, the monetary policy framework became “virtually inoperative” over the summer.
- Asset price inflation: real estate prices showed upward pressures; stock market prices rose by 40 percent since end-March.
- CPI inflation: fell to 2.2 percent in June 2009 (after a decline in international food and commodity prices) and rose to 6.7 percent in October 2009 as prices climbed again.
- Projection: ample liquidity and adverse base effects likely to drive up inflation throughout FY2010, “possibly to double digits by the summer.”

### Fiscal performance FY2009
- FY2009 budget deficit remained below the budget target, despite revenue shortfalls, largely due to underimplementation of the Annual Development Program (ADP).
- Tax revenue ratio: declined by 0.2 percent of GDP to 8.6 percent of GDP, falling short of the original budget target by 0.6 percent of GDP.
- ADP spending: fell short of the original budget by 1 percent of GDP.
- Overall fiscal deficit (including grants) amounted to 3 percent of GDP in FY2009, almost 1 percentage point of GDP smaller than envisaged in the original budget.
- Counterpart to lower deficit: mostly lower than budgeted disbursements of foreign loans.

### Structural reforms, financial sector, and policy recommendations
- Progress on infrastructure bottlenecks (power and gas shortages) and Public Private Partnerships (PPP) has been slow; comprehensive plans remain under discussion.
- Reintroduction of interest rate ceilings on important categories of bank lending seen as a setback to financial market development.
- Recent appointments at the Boards of Directors of three state-owned commercial banks (SCBs) were “not fully in line with established regulations.”
- FY2010 budget extended para-tariffs and introduced a regulatory duty on many consumer goods — described as raising nominal protection and “second-best to comprehensive tax policy reform.”
- Executive Directors’ policy recommendations (summarized):
  - Immediate concern: prevent an increase in inflation. BB should employ all available instruments and take preemptive and bold action; accept higher market interest rates to prevent inflation acceleration.
  - Move towards greater flexibility in the exchange rate to support monetary policy and deepen the foreign exchange market; Directors believed the taka is somewhat undervalued.
  - Medium-term: unleash Bangladesh’s potential while maintaining fiscal prudence and sustainability; higher growth achievable through higher revenue and higher capital spending.
  - Strong encouragement to push through plans for Value-Added Tax (VAT) reforms.
  - Remove ceilings on lending rates and other non-prudential interventions as soon as possible; increase flexibility of interest rates, including for National Savings Certificates (NSCs).
  - Accelerate restructuring of SCBs.
  - Improve the quality and timeliness of statistics, with national account statistics viewed as particularly urgent.
  - Adopt a timetable for removal of the remaining exchange restriction (subject to approval under Article VIII) on transferability of funds in nonresident taka accounts.

### Outlook and Executive Board Assessment
- Near term: growth momentum likely to remain somewhat subdued; inflation expected to increase. Growth in FY2010 could decelerate due to weak imports (particularly capital machinery), sluggish exports and private sector credit, and subdued hiring of Bangladeshi workers abroad. Strong agricultural performance in FY2009 will be hard to exceed.
- Medium term: as global growth and trade recover, Bangladesh’s growth should edge up to around 6 percent per annum, supported by increasing trade integration and momentum in agriculture, services, and construction. Current account expected to remain in surplus with robust import coverage of reserves.
- Executive Directors commended authorities for strong performance, noted fiscal conservatism’s benefits, and projected medium-term baseline growth at 6 percent while identifying the two main policy issues above (inflation/monetary policy and unleashing growth through revenue and capital spending).

### Key economic indicators, FY05–FY09 (exact figures as reported)
- Real GDP (percent change): FY05 6.0, FY06 6.6, FY07 6.4, FY08 6.2, FY09 5.9
- GDP deflator (percent change): FY05 5.1, FY06 5.2, FY07 6.8, FY08 8.0, FY09 6.4
- CPI inflation (annual average): FY05 6.5, FY06 7.2, FY07 7.2, FY08 9.9, FY09 6.7

Central government operations (percent of GDP)
- Total revenue: FY05 10.5, FY06 10.7, FY07 10.2, FY08 10.8, FY09 10.4
- Tax: FY05 8.5, FY06 8.5, FY07 8.2, FY08 8.8, FY09 8.6
- Nontax: FY05 2.0, FY06 2.2, FY07 2.0, FY08 2.0, FY09 1.8
- Total expenditure: FY05 13.8, FY06 13.9, FY07 13.4, FY08 15.9, FY09 14.1
- Current expenditure: FY05 8.4, FY06 8.4, FY07 9.1, FY08 9.6, FY09 9.8
- Interest payments (of which): FY05 1.7, FY06 1.8, FY07 1.9, FY08 2.5, FY09 2.4
- Subsidies (of which): FY05 2.8, FY06 2.6, FY07 3.0, FY08 3.4, FY09 3.8
- Annual Development Program: FY05 5.0, FY06 4.7, FY07 4.0, FY08 3.4, FY09 3.2
- Other expenditures: FY05 0.4, FY06 0.8, FY07 0.3, FY08 3.0, FY09 1.1
- Overall balance (excluding grants) 2/: FY05 -3.3, FY06 -3.2, FY07 -3.2, FY08 -5.1, FY09 -3.7
- Primary balance 2/: FY05 -1.7, FY06 -1.4, FY07 -1.3, FY08 -2.6, FY09 -1.3
- Overall balance (including grants) 2/: FY05 -3.0, FY06 -2.8, FY07 -2.6, FY08 -4.6, FY09 -3.0
- Financing (net): FY05 3.3, FY06 3.2, FY07 3.2, FY08 5.1, FY09 3.7
  - Domestic 2/: FY05 1.7, FY06 2.1, FY07 1.9, FY08 2.6, FY09 2.4
  - External (including grants): FY05 1.6, FY06 1.2, FY07 1.3, FY08 2.5, FY09 1.3
- Total central government debt (percent of GDP): FY05 49.1, FY06 49.1, FY07 48.8, FY08 46.7, FY09 45.3

Money and credit (end of fiscal year; percent change)
- Net domestic assets: FY05 17.5, FY06 19.2, FY07 12.6, FY08 18.3, FY09 17.6
- Credit to private sector: FY05 17.0, FY06 18.3, FY07 15.1, FY08 25.1, FY09 14.6
- Broad money (M2): FY05 16.7, FY06 19.3, FY07 17.1, FY08 17.6, FY09 19.2

Balance of payments (in billions of U.S. dollars)
- Exports, f.o.b.: FY05 8.6, FY06 10.4, FY07 12.1, FY08 14.2, FY09 15.6
  - Annual percent change (exports): FY05 14.0, FY06 21.4, FY07 15.8, FY08 17.4, FY09 10.1
- Imports, f.o.b.: annual percent change (imports) FY05 -11.9, FY06 -13.3, FY07 -15.5, FY08 -19.5, FY09 -20.3
  - Annual percent change (imports, alternative series): FY05 20.6, FY06 12.1, FY07 16.6, FY08 25.6, FY09 4.2
- Current account (in billions): FY05 -0.6, FY06 0.6, FY07 1.0, FY08 0.7, FY09 2.5
- Current account (percent of GDP): FY05 -0.9, FY06 0.9, FY07 1.4, FY08 0.9, FY09 2.8

Gross official reserves (in billions of U.S. dollars)
- FY05 2.9, FY06 3.5, FY07 5.1, FY08 6.1, FY09 7.5
- In months of imports of goods and nonfactor services: FY05 2.2, FY06 2.3, FY07 2.7, FY08 3.1, FY09 3.6

Memorandum item:
- Nominal GDP (in billions of taka): FY05 3,707, FY06 4,157, FY07 4,725, FY08 5,458, FY09 6,149

*Source: IMF Public Information Notice No. 10/28, February 23, 2010, Executive Board conclusion of the 2009 Article IV consultation with Bangladesh.*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2010/_cr1055.pdf_