An International Monetary Fund (IMF) mission, led by Mr. Brian Aitken,
visited Dhaka during February 26-March 9 to hold discussions on the 2017
Article IV Consultation with Bangladesh. The mission
met with the Finance Secretary, Bangladesh Bank Governor, Executive
Chairman Bangladesh Investment Development Authority, Secretary Bank and
Financial Institutions Division, Chairman National Board of Revenue, other
senior officials, as well as representatives of the business and banking
sectors, labor unions, think tanks and development partners.
At the conclusion of the visit, Mr. Aitken made the following statement:
“Steady monetary policy management and fiscal discipline have delivered the
macroeconomic stability that allowed the economy to benefit from a
favorable external demand, high remittances, and low commodity prices. The
result has been strong output growth, falling inflation, moderate public
debt, and a rebuilding of external resilience. This solid macroeconomic
performance is set to continue this year, with output growth projected to
remain close to current levels and inflation broadly in line with
Bangladesh Bank’s target.
“Looking ahead, maintaining the economy’s past growth performance will
become increasingly challenging over the medium term, and will require
upgrading the macroeconomic policy-making practices and institutions to
support the country’s ambition to reach middle-income status.
“Against this backdrop, the staff team and the authorities discussed
policies and reforms to preserve macroeconomic stability and contain risks,
maintain competitiveness, build buffers against global uncertainties and
shocks, mobilize revenue to fund needed public investment without
compromising debt sustainability, and build a financial sector that
supports a productive use of Bangladesh’s ample savings.
“Bangladesh’s investment needs are large, and will require stepping up
intermediation of the country’s underutilized pool of savings over longer
horizons. As commercial banks’ ability to carry out this function will
remain limited, policies that develop the country’s capital markets for
financing long-term private investment would greatly improve future growth
prospects. An important impediment to modernizing the financial sector
arises from the increasing reliance on high-cost National Savings
Certificates (NSCs) as a financing vehicle for the government budget, which
prevents the development of a deep and liquid market for government
securities. The authorities could consider whether there are better
targeted and less costly alternatives that achieve the government’s social
policy goals without distorting financial markets.
“Modernizing the tax system will be needed to boost Bangladesh’s low budget
revenue and allow room for public investment and social spending to
increase to levels consistent with the government’s growth ambitions
without compromising fiscal sustainability. Launching the new VAT Law in
July 2017 as planned will be central to raising revenue, and will have
other significant benefits as well. In particular, it will make tax
administration more transparent, it will reduce taxpayers’ compliance
costs, and serve as a key building block for a modern tax system more
broadly.
“The Bangladesh economy will continue to rely on exports and remittances
for growth, and remains particularly exposed to the changing external
environment. It is therefore essential that the country’s foreign exchange
reserves buffers, which have been built over the last several years,
continue to be maintained at levels adequate to ensure the economy’s
resilience.
“The IMF stands ready to support the government’s reform efforts through
policy advice and capacity building, including on monetary and fiscal
policies, financial sector supervision and regulation, and macroeconomic
statistics.”
