IMF Executive Board Concludes the Second Review under the Extended Credit Facility, Extended Fund Facility, Resilience and Sustainability Facility for Bangladesh

IMF News, June 24, 2024

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IMF Executive Board Concludes the Second Review under the Extended Credit Facility, Extended Fund Facility, Resilience and Sustainability Facility for Bangladesh

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Bibliographic details

• Published: June 24, 2024

Review outcome and disbursements

• The Executive Board concluded the second review under Bangladesh’s arrangements under the Extended Credit Facility (ECF), Extended Fund Facility (EFF), and Resilience and Sustainability Facility (RSF).
• Immediate access made available:
  • SDR704.70 million (about US$928 million) under the ECF/EFF.
  • SDR166.68 million (about US$220 million) under the RSF.
• Cumulative disbursements following these reviews:
  • ECF/EFF total disbursements: SDR1,409.40 million (about US$1,856 million).
  • RSF total disbursements: SDR333.35 million (about US$439 million).
• The Executive Board granted a waiver of nonobservance of a performance criterion for the floor on net international reserves on the basis of corrective actions.

Economic context and recent developments

• Key challenges:
  • Stubbornly high international commodity prices.
  • Continued global financial tightening amplifying macroeconomic vulnerabilities.
  • A sudden reversal of the financial account that has kept foreign exchange (FX) reserves and the Taka under pressure.
• Authorities’ response:
  • Recent bold exchange rate reforms; implementation of a new exchange rate arrangement and realignment of the exchange rate.

Projections and near-term outlook

• Growth and inflation projections:
  • Real GDP growth slowed to 4.8 percent in FY24H1.
  • Real GDP growth projected at 5.4 percent in FY24 (owing to ongoing import compression and policy tightening).
  • Real GDP growth projected to pick up to 6.6 percent in FY25 (as imports rebound and FX pressures ease).
  • Headline inflation reached 9.7 percent year-on-year in April 2024.
  • Inflation projected at approximately 9.4 percent in FY24 and anticipated to decline to around 7.2 percent in FY25.
• Reserves and external resilience:
  • Following the exchange rate realignment, gross international reserves (GIR) are projected to gradually increase.
  • Uncertainties remain high and risks are tilted to the downside.

Policy recommendations and reform priorities (from the Acting Chair statement)

• Near-term priorities:
  • Rebuild external resilience and bring down inflation.
  • Continue monetary and fiscal policy tightening; further tightening if external and inflationary pressures intensify.
  • Periodic reviews of the crawling peg to ensure effectiveness.
• Structural and institutional reforms:
  • Modernize the monetary policy framework and improve policy transmission.
  • Smoothly transition to a flexible exchange rate regime and bolster FX reserve buffers.
  • Address vulnerabilities in the financial sector; strengthen banking regulation, supervision, and governance.
  • Deepen capital markets to mobilize financing for long-term growth objectives.
  • Raise tax revenues and rationalize expenditure, including by reducing subsidies, to generate fiscal space for social, development, and climate initiatives.
  • Strengthen public financial and investment management and enhance state-owned enterprise oversight to improve spending efficiency and mitigate fiscal risks.
  • Sustain structural reforms to reach upper middle-income country status by 2031: diversify exports, attract more foreign direct investment, and strengthen governance.
• Climate and resilience priorities:
  • Build resilience to climate change and natural disasters by strengthening institutions and policy coordination, improving climate spending efficiency, and mobilizing climate financing.
  • The launch of the Bangladesh Climate and Development Platform in collaboration with development partners is noted as a welcome development.

Selected economic indicators (FY2021–26; projections where indicated)

• Real GDP (annual percent change)
  • FY21: 6.9
  • FY22: 7.1
  • FY23: 5.8
  • FY24: 5.4
  • FY25: 6.6
  • FY26: 7.6
• Consumption — Private (annual percent change)
  • FY21: 8.0
  • FY22: 7.5
  • FY23: 3.6
  • FY24: 4.9
  • FY25: 6.3
  • FY26: 6.2
• Consumption — Public (annual percent change)
  • FY21: 10.5
  • FY22: 5.0
  • FY23: 6.7
  • FY24: 7.3
• Gross Capital Formation (annual percent change)
  • FY21: 8.1
  • FY22: 11.7
  • FY23: 2.9
  • FY24: 10.3
  • FY25: 9.7
  • FY26: 7.8
• Trade — Exports of goods and services (annual percent change)
  • FY21: 9.2
  • FY22: 29.4
  • FY23: 10.6
  • FY24: 15.0
  • FY25: 4.7
  • FY26: 5.9
• Trade — Imports of goods and services (annual percent change)
  • FY21: 15.3
  • FY22: 31.2
  • FY23: -2.6
  • FY24: 2.2
  • FY25: 5.1
• Prices (annual percent change)
  • GDP Deflator — FY21: 4.1; FY22: 5.6
  • CPI inflation (annual average) — FY21: 6.1; FY22: 9.0; FY23: 9.4; FY24: 7.2
  • CPI inflation (end of period) — FY21: 8.4; FY22: 7.0; FY23: 5.5
• Central government operations (in percent of GDP)
  • Total revenue and grants — FY21: 8.9; FY22: 8.2; FY23: 8.8; FY24: 9.3; FY25: 9.9
  • Of which: tax revenue — FY21: 13.0; FY22: 12.8; FY23: 13.5; FY24: 13.3; FY25: 14.7
  • Of which: Annual Development Program (ADP) — FY21: 4.5; FY22: 4.3; FY23: 4.6
  • Overall balance (including grants) — FY21: -3.6; FY22: -4.1; FY23: -4.6; FY24: -4.0; FY25: -4.8
  • Overall balance (excluding grants) — FY21: -3.7; FY22: -4.2; FY23: -4.7; FY24: -4.9
  • Primary balance (including grants) — FY21: -1.6; FY22: -2.1; FY23: -2.5; FY24: -2.8; FY25: -2.2; FY26: -2.4
• Public sector total debt (percent of GDP)
  • FY21: 35.6
  • FY22: 37.9
  • FY23: 39.3
  • FY24: 41.3
  • FY25: 40.7
  • FY26: 40.9
  • Of which: External debt — FY21: 15.1; FY22: 15.4; FY23: 17.5; FY24: 18.9; FY25: 18.6; FY26: 17.8
• Balance of Payments (in percent of GDP)
  • Current account balance — FY21: -1.1; FY22: -0.7; FY23: -0.1; FY24: -2.7
  • Trade balance — FY21: -6.4; FY22: -8.0; FY23: -5.7; FY24: -6.5
  • Service balance — FY21: -0.9; FY22: -1.2
  • Income balance — FY21: -0.8
  • Transfers — FY21: 6.0; FY22: 4.8
  • Capital account balance — FY21: 0.1; FY22: 0.0
  • Financial account balance — FY21: 3.4; FY22: -0.5; FY23: -1.3; FY24: 3.5
  • Foreign direct investment, net — FY21: 0.3; FY22: 0.4; FY23: 0.9; FY24: 1.1
• Gross international reserves (billions of U.S. dollars)
  • FY21: 46.4
  • FY22: 33.4
  • FY23: 24.8
  • FY24: 19.0
  • FY25: 23.3
  • FY26: 32.1
  • In months of next year’s imports — FY21: 2.3; FY22: 2.5; FY23: 3.1
• Money and credit (in percent of GDP)
  • Reserve money — FY21: 9.8; FY22: 8.7; FY23: 8.5
  • Broad money (M2) — FY21: 54.6; FY22: 52.9; FY23: 50.7; FY24: 50.5; FY25: 51.3; FY26: 51.9
  • Credit to private sector — FY21: 36.2; FY22: 36.6; FY23: 35.3; FY24: 33.9; FY25: 32.0; FY26: 32.3
  • Credit to private sector (percent change) — FY21: 13.7; FY22: 7.7; FY23: 14.6
• Savings and Investment (in percent of GDP)
  • Gross national savings — FY21: 30.8; FY22: 29.3; FY23: 31.0; FY24: 28.7; FY25: 28.5; FY26: 29.0
  • Gross investment — FY21: 30.9; FY22: 28.8; FY23: 31.7; FY24: 23.7; FY25: 24.5; FY26: 23.4
• Memorandum item:
  • Nominal GDP (in billions of Taka) — FY21: 35,302; FY22: 39,717; FY23: 44,908; FY24: 50,068; FY25: 57,045; FY26: 64,844

IMF Executive Board Concludes the Second Review under the Extended Credit Facility, Extended Fund Facility, Resilience and Sustainability Facility for Bangladesh — Press Release No. 24/234, June 24, 2024.

References

• https://www.imf.org/-/media/images/imf/bios/imfboard.jpg
• The Executive Board
• PRESS CENTER
• Bangladesh and the IMF
• IMF-World Bank Debt Sustainability Framework for Low-Income Countries -- A Factsheet
• Press Releases
• Press Release No. 23/25
• IMF Country Focus
• https://www.imf.org/en/home