Bangladesh: Selected Issues
IMF Staff Country Reports, December 14, 2023
Source details
- Canonical URL
- Bangladesh: Selected Issues
Other formats
Bibliographic details
- Published: December 14, 2023
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9798400260728.002
Overview
- Publication date: December 14, 2023.
- This Selected Issues paper discusses policy options and trade-offs in Bangladesh amid a bout of persistently high inflation since the beginning of Russia’s war in Ukraine.
- The analysis applies a semistructural Quarterly Projection Model to assess drivers of elevated inflation and evaluate policy options to tame inflation and their trade-offs.
Key findings
- Bangladesh experienced a prolonged period of stable inflation followed by persistently high inflation starting with Russia’s war in Ukraine.
- A concerted but carefully calibrated tightening of the monetary policy stance will be needed to bring inflation down to Bangladesh Bank’s target range.
- Concurrent fiscal policy consolidation could aid a faster disinflation process but could lead to disproportionately substantial output costs because the Bangladesh economy is operating at below potential and navigating multiple external shocks.
- Ongoing reforms to modernize the monetary policy framework could reduce economic volatility and costs associated with significant exchange rate pressures and heightened inflation.
Policy analysis and recommendations
- Monetary policy:
- Tighten the monetary policy stance in a concerted but carefully calibrated manner to restore price stability and bring inflation to Bangladesh Bank’s target range.
- Fiscal policy:
- Consider fiscal consolidation to support disinflation, with caution due to potential disproportionate output costs given below-potential economic conditions and external shocks.
- Institutional reform:
- Continue reforms to modernize the monetary policy framework to reduce volatility and the economic costs of exchange rate pressures and elevated inflation.
Modeling approach and analytical scope
- Analytical tool: semistructural Quarterly Projection Model.
- Purpose: to assess drivers of recently elevated inflation in Bangladesh and evaluate different policy options and associated trade-offs.
Subject areas and keywords
- Subjects: Exchange rate arrangements, Exchange rate flexibility, Exchange rates, Foreign exchange, Gender, Gender inequality, International organization, Monetary policy, Women.
- Keywords: B. monetary policy option, C. managing transition, Exchange rate arrangements, Exchange rate flexibility, Exchange rates, Gender inequality, gender responsive budgeting, Global, IMF resident representative's office, inflation expectation, South Asia, Women.
Content in this bundle
- Bangladesh: Selected Issues; IMF Country Report No. 23/410; November 21, 2023