{
  "title": "Public Information Notice: IMF Executive Board Concludes 2008 Article IV Consultation with Bangladesh",
  "publication": "IMF News, September 30, 2008",
  "sourceUrl": "https://www.imf.org/en/news/articles/2015/09/28/04/53/pn08126",
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  "summary": "Each Public Information Notice contains a background section, a table of selected economic indicators, and an Executive Board assessment.",
  "publishDate": "2008-09-30",
  "sections": [
    {
      "heading": "Background",
      "content": "- Article IV consultation concluded by the Executive Board on September 19, 2008.\n- Macroeconomic performance and shocks\n  - Real GDP growth in FY08 (July-June) remained strong at above 6 percent.\n  - Inflation picked up to average 10 percent over the year, driven by escalating international food and fuel prices.\n  - Inflationary pressures expected to remain high with the increase in administered fuel prices implemented on July 1 and signs of emerging demand pressures.\n- External sector\n  - Nominal exchange rate remained stable in dollar terms in FY08, but depreciated by 6½ percent in effective terms as the dollar's value decreased in international markets.\n  - Strong remittance growth, a pickup in garment exports and external assistance kept the current account in surplus despite an increase in the trade deficit.\n  - International reserves grew moderately to 2¾ months of prospective imports in a year of increased import demand and high international commodity prices.\n- Fiscal developments\n  - Overall fiscal balance for FY08 estimated to have been below the budget target.\n  - Government revenue collection improved impressively and exceeded the budget target for the first time in recent history, driven by improved taxpayer compliance and collection of tax arrears.\n  - Overall fiscal deficit was 3.3 percent of GDP compared with the budget target of 4.5 percent of GDP (excluding historical losses of the petroleum company).\n  - Increased external assistance allowed domestic financing to remain below 2 percent of GDP.\n- Revenue administration and tax policy\n  - Institutional framework for separating tax policy from administration has been established; a new unit will begin work by the end of the year.\n  - Two Large Taxpayer Units placed under control of a single member at the National Board of Revenue to improve enforcement.\n  - Revenue gains reflected improvement in taxpayer compliance in part from the authorities' new universal self-assessment.\n- Monetary and financial developments\n  - Growth in monetary aggregates moderated in the first half of FY08 but picked up rapidly in the last part of the year.\n  - Broad money growth stood at 17½ percent at end-June.\n  - Private sector credit growth reached 25 percent in June, reflecting need to finance increased food imports and Bangladesh Bank's selectively accommodative monetary policy focusing on growth-driving sectors.\n  - Financial sector reforms undertaken: strengthen regulatory and prudential framework of Bangladesh Bank (BB); corporatize and improve management of state-owned commercial banks (SCBs); automate stock trading; establish a government securities market.\n  - SCBs still account for over 30 percent of total banking sector assets and remain moribund, undermining financial system efficiency.\n  - Inflexibility in interest rates in the auction process of government securities has limited operation of the primary dealer system and development of an active secondary market.\n- Medium-term outlook\n  - Growth projected to increase to around 7 percent over the medium term, driven by improvements in agriculture and expansion in domestic services and construction, supported by strong regional growth momentum.\n  - External current account projected to remain broadly in balance, with export and remittance growth offsetting growth in imports arising from higher investment.\n  - External assistance and gradually increasing capital inflows expected to underpin a steady increase in international reserve coverage."
    },
    {
      "heading": "Executive Board Assessment",
      "content": "- Commendations and overarching view\n  - Directors commended authorities for maintaining macroeconomic stability amid multiple natural disasters and elevated food and fuel prices, which severely pressured incomes, particularly of the urban and landless rural poor.\n  - Despite long-term challenge of climate change, Directors judged medium-term outlook favorable.\n  - Economic growth expected to increase as key structural reforms take root and the country capitalizes on accelerating regional growth.\n- Inflation and monetary policy\n  - Preventing an increase in inflation identified as the immediate priority because the poor and vulnerable are hit hardest.\n  - With fiscal policy focusing on addressing social impact of higher commodity prices, most Directors saw need to tighten monetary policy to keep inflation expectations in check.\n  - Directors welcomed recent action by the central bank in this regard.\n- External stability and exchange rate policy\n  - Directors agreed macroeconomic policies are consistent with external stability; external current account expected to stay broadly in balance.\n  - Current exchange rate policy has allowed the real exchange rate of the taka to remain in line with medium-term fundamentals.\n  - Directors broadly agreed more flexibility in the rate would support monetary policy objectives and encourage deepening of the foreign exchange market.\n  - Directors urged authorities to adopt a timetable to remove the remaining exchange restriction.\n- Fiscal policy, revenue, and social protection\n  - Directors congratulated authorities on recent progress in fiscal stability; significant improvement in revenue collections has helped offset increasing energy and fertilizer subsidies and larger outlays on social safety nets.\n  - The July increase in administered prices was described as a bold step that prevented deterioration in state-owned enterprise finances.\n  - Directors noted more remains to be done to place state-owned enterprises on a secure footing and to increase poverty-reducing spending.\n  - Keeping to macroeconomic targets of the FY09 budget considered important in controlling inflation.\n  - Directors supported the budget's mildly expansionary stance, given recent fiscal prudence and the need to address social impact of higher food prices.\n  - Given current inflationary pressures, Directors encouraged authorities to use any excess revenue collections to reduce domestic financing.\n  - Increasing revenue seen as crucial to return fiscal policy to a lower deficit path in the medium term while increasing essential public expenditures.\n  - Directors encouraged authorities to revise income tax and value-added tax legislation and to maintain progress in strengthening revenue administration and enforcement.\n  - Replacing open-ended price subsidies with more affordable and better-targeted social safety nets recommended to provide fiscal space for increases in public investment and social services.\n  - Directors urged authorities to address constraints in implementing the Annual Development Program so that priority spending increases align with development needs.\n- Financial sector deepening and structural reforms\n  - Further deepening of the financial sector seen as key to achieving growth potential.\n  - Authorities encouraged to prioritize strengthening financial positions of SCBs and developing a secondary market for government securities.\n  - Directors called on authorities to accelerate implementation of structural reforms and strengthen institutions to attract investment and prevent a slowdown that could jeopardize debt sustainability.\n  - Improving infrastructure, particularly in the electric power sector, highlighted as important."
    },
    {
      "heading": "Bangladesh: Selected Economic Indicators, FY2004-08",
      "content": "- National income and prices (percent change)\n  - Real GDP: FY04 6.3; FY05 6.0; FY06 6.6; FY07 6.4; FY08 6.2 (Est.)\n  - GDP deflator: FY04 4.2; FY05 5.1; FY06 5.2; FY07 6.8; FY08 8.0\n  - CPI inflation (annual average): FY04 5.8; FY05 6.5; FY06 7.2; FY07 9.9; FY08 (not listed in table cells beyond narrative)\n- Central government operations (percent of GDP)\n  - Total revenue: FY04 10.2; FY05 10.5; FY06 10.7; FY07 11.4; FY08 (not listed in table cells)\n  - Tax: FY04 8.2; FY05 8.5; FY06 9.1\n  - Nontax: FY04 1.9; FY05 2.0; FY06 2.2; FY07 2.3\n  - Total expenditure: FY04 13.3; FY05 13.8; FY06 13.9; FY07 13.4; FY08 16.1\n  - Current expenditure: FY04 7.8; FY05 8.4\n  - Of which: Interest payments: FY04 1.6; FY05 1.7; FY06 1.8\n  - Of which: Subsidies: FY04 2.4; FY05 2.8; FY06 2.6; FY07 3.0; FY08 3.6\n  - Annual Development Program: FY04 5.0; FY05 4.7; FY06 4.0\n  - Other expenditures 2/: FY04 0.5; FY05 0.4; FY06 0.8; FY07 0.3; FY08 3.2\n  - Overall balance (excluding grants) 3/: FY04 -3.1; FY05 -3.3; FY06 -3.2; FY07 -4.7\n  - Primary balance 3/: FY04 -1.4; FY05 -1.7; FY06 -1.3; FY07 -2.5\n- Financing (net)\n  - FY04 3.1; FY05 3.3\n  - Domestic 3/: FY04 2.1; FY05 2.5\n  - External: FY04 1.3; FY05 1.2\n- Total central government debt (percent of GDP)\n  - FY04 51.0; FY05 50.1; FY06 48.3; FY07 46.0; FY08 43.8\n- Money and credit (end of fiscal year; percent change)\n  - Net domestic assets: FY04 13.5; FY05 17.1; FY06 19.6; FY07 12.6; FY08 18.0\n  - Credit to private sector: FY04 17.5; FY05 17.0; FY06 18.3; FY07 15.1; FY08 25.1\n  - Broad money (M2): FY04 16.7; FY05 19.3; FY06 17.6\n- Balance of payments (in billions of U.S. dollars)\n  - Exports, f.o.b.: FY04 7.5; FY05 8.6; FY06 10.4; FY07 12.1; FY08 14.2\n  - (Annual percent change): FY04 15.9; FY05 14.0; FY06 21.6; FY07 15.6; FY08 18.1\n  - Imports, f.o.b.: FY04 -9.8; FY05 -11.9; FY06 -13.3; FY07 -15.5; FY08 -19.5\n  - (Annual percent change): FY04 13.0; FY05 20.6; FY06 16.6; FY07 25.8\n  - Current account (in billions): FY04 0.2; FY05 -0.6; FY06 0.6; FY07 1.0\n  - (Percent of GDP): FY04 -0.9; FY05 0.9; FY06 1.4\n  - Gross official reserves (in billions of U.S. dollars): FY04 2.7; FY05 2.9; FY06 3.5; FY07 6.1\n  - In months of imports of goods and nonfactor services: (table indicates measure but specific FY08 months value given in narrative as) 2¾ months of prospective imports.\n- Memorandum item\n  - Nominal GDP (in billions of taka): FY04 3,330; FY05 3,707; FY06 4,157; FY07 4,725; FY08 5,419\n\nPublic Information Notice (PIN) No. 08/126, September 30, 2008. On Article IV consultations: the IMF holds bilateral discussions with members under Article IV of the IMF's Articles of Agreement.\n\n---\n\n\n References\n\n- Bangladesh and the IMF\n- Public Information Notices\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2015/09/28/04/53/pn08126"
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    "Published: September 30, 2008",
    "Article IV consultation concluded by the Executive Board on September 19, 2008.",
    "Macroeconomic performance and shocks",
    "External sector",
    "Fiscal developments",
    "Revenue administration and tax policy",
    "Monetary and financial developments",
    "Medium-term outlook",
    "Commendations and overarching view",
    "Inflation and monetary policy",
    "External stability and exchange rate policy",
    "Fiscal policy, revenue, and social protection",
    "Financial sector deepening and structural reforms",
    "National income and prices (percent change)",
    "Central government operations (percent of GDP)",
    "Financing (net)",
    "Total central government debt (percent of GDP)",
    "Money and credit (end of fiscal year; percent change)",
    "Balance of payments (in billions of U.S. dollars)",
    "Memorandum item",
    "[Bangladesh and the IMF](http://www.imf.org/external/country/BGD/index.htm)",
    "[Public Information Notices](https://www.imf.org/en/news/searchnews)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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