## IMF Executive Board Concludes 2021 Article IV Consultation with Bangladesh

_IMF News, March 3, 2022_

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## Bibliographic details
- Published: March 3, 2022

---

### Overview
- The Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Bangladesh on March 2, 2022.
- Since 2010, per capita real GDP growth averaged 5 percent annually, contributing to a steady decline in poverty and increasing access to education and healthcare.
- Bangladesh met the UN criteria to graduate from the category of Least Developed Countries in February 2021.
- The authorities announced support packages worth Tk 1.9 trillion (or 6 percent of GDP) to address the economic fallout of the pandemic.

### Recent macroeconomic developments
- GDP growth:
  - FY20: 3.5 percent (reflecting sharp contraction in exports, remittances, and imports, and a nation-wide lockdown).
  - FY21 (estimate): 5.0 percent (supported by a rebound in exports, high take-up of stimulus packages by the export sector, and a partial exemption of the RMG sector from second-round lockdowns).
- External sector:
  - Current account (CA) deficit: FY20: 1.7 percent of GDP; FY21: 1.3 percent of GDP (remittances surpassed pre-crisis levels).
- Pandemic response and vaccination:
  - Authorities reacted quickly and decisively with fiscal support and suspended low-priority capital projects to create space for support.
  - Vaccination progress: “Vaccination, dragged down by initial supply shortages, is catching up.”
- Macroeconomic outcomes in recent years:
  - Inflation: generally stable.
  - Debt-to-GDP: low.
  - External buffers: adequate.

### Projections and risks
- Growth and inflation projections:
  - FY22: Growth expected to pick up to 6.6 percent.
  - FY22: Headline CPI inflation projected to rise to 5.9 percent driven by higher international commodity prices.
- Fiscal and external projections:
  - Fiscal deficit: projected to peak at 6.1 percent of GDP in FY22 as pandemic-related spending increases.
  - Current account deficit: projected to widen to 2.4 percent of GDP in FY22 as imports rebound and remittances moderate.
- Outlook and risks:
  - The uncertainty around the outlook is high and risks are tilted to the downside.

### Executive Board assessment and policy recommendations
- Commendations and overall assessment:
  - Directors commended prompt and decisive policy response to the pandemic that facilitated a faster recovery.
  - Directors recognized impressive economic growth and social development but noted risks from the uncertain path of the pandemic, low vaccination rates, and vulnerabilities to climate change.
  - Directors noted that Bangladesh’s capacity to repay the Fund remains sound and that fiscal prudence has helped maintain a low risk of debt distress.
- Fiscal policy recommendations:
  - Modernize revenue administration and implement tax policy reforms to raise revenues for sustainable increases in development, social, and climate spending.
  - Accompany revenue measures with measures to rationalize spending and improve spending efficiency.
- Monetary and exchange rate policy recommendations:
  - Closely monitor inflation developments and stand ready to normalize monetary policy.
  - Phase out caps on interest rates to improve credit allocation.
  - Continue modernizing the monetary policy framework and gradually increase exchange rate flexibility.
  - Safeguard reserves coverage and avoid using reserves for nonmonetary purposes.
- Banking sector and financial stability recommendations:
  - Exit COVID-19 policies in a timely and orderly way, monitor bank asset quality closely, and ensure adequate capital buffers.
  - Strengthen banking regulation and supervision, improve corporate governance, and reform legal systems to stem high non-performing loans, particularly in state-owned commercial banks.
  - Implement recommendations of the 2021 safeguards assessment and further strengthen the AML/CFT framework.
  - Further develop capital markets and strengthen governance to attract private financing.
  - Publish completed audits related to COVID-19 spending without further delay.
- Structural and climate-related recommendations:
  - To lift growth potential, focus structural policies on diversifying exports, increasing FDI, enhancing productivity, investing in human capital, and addressing corruption.
  - Continue building resilience to climate change and natural disasters, including allocating budgetary support for climate adaptation, and undertake reforms to help catalyze climate financing.

### Selected economic indicators (highlights from Table 1)
- Social and demographic indicators:
  - Population (2020, millions; estimate): 165
  - Infant mortality (2016, per thousand live births): 28.0
  - GDP per capita (2020, U.S. dollars): 1962
  - Life expectancy at birth (2016, years): 71.6
  - Labor force participation rate (2017, percent; national measure): 58.4
  - Adult literacy (2016, percent of people): 73.0
  - Poverty headcount ratio (2019, national measure, percent): 20.5
  - Population dependency ratio (2017, percent): 50.0
  - Gini index (2016,World Bank estimate): 32.1
  - Population growth (FY20, y/y, percent; estimate): 1.0
- Macroeconomic indicators (selected annual percent change and ratios):
  - Real GDP:
    - FY18: 7.9
    - FY19: 8.2
    - FY20: 3.5
    - FY21 (Est.): 5.0
    - FY22 (Proj.): 6.6
    - FY23 (Proj.): 7.1
  - CPI inflation (annual average):
    - FY18: 5.5
    - FY19: 5.9
  - Central government operations (percent of GDP):
    - Total revenue and grants: FY18: 10.4; FY19: 9.5; FY20: 9.8; FY21: 10.9; FY22: 10.8
    - Total expenditure: FY18: 15.2; FY19: 15.7; FY20: 15.4; FY21: 15.1; FY22: 16.9; FY23: 16.5
    - Overall balance (including grants): FY18: -4.8; FY19: -6.3; FY20: -5.6; FY21: -4.2; FY22 (Proj.): -6.1; FY23 (Proj.): -5.7
    - Primary balance (excluding grants): FY18: -3.0; FY19: -4.4; FY20: -3.6; FY21: -1.9; FY22: -3.7
    - Total central government debt (percent of GDP): FY18: 34.6; FY19: 36.1; FY20: 39.5; FY21: 41.4; FY22: 42.5; FY23: 42.7
  - Money and credit (end of fiscal year; percent change):
    - Credit to private sector by the banking system: FY18: 17.0; FY19: 11.3; FY20: 8.3; FY21: 11.6; FY22: 11.5
    - Reserve money: FY18: 4.0; FY19: 15.5; FY20: 22.3; FY21: 10.0; FY22: 13.7
    - Broad money (M2): FY18: 9.2; FY19: 12.7; FY20: 13.6; FY21: 15.0
  - Balance of payments (billions of U.S. dollars / percent of GDP):
    - Exports, f.o.b.:
      - FY18: 36.3
      - FY19: 39.6
      - FY20: 36.9
      - FY21: 43.2
      - FY22 (Proj.): 44.6
      - Annual percent change: FY18: 6.7; FY19: 9.1; FY20: -18.9; FY21: 14.9; FY22: 3.3
    - Imports, f.o.b. (billions of U.S. dollars):
      - FY18: -54.5
      - FY19: -55.4
      - FY20: -50.7
      - FY21: -60.7
      - FY22: -67.8
      - FY23: -71.0
      - Annual percent change: FY18: 25.2; FY19: -8.6; FY20: 19.7; FY21: 11.7; FY22: 4.7
    - Current account balance (billions of U.S. dollars):
      - FY18: -9.6
      - FY19: -4.5
      - FY20: -5.4
      - FY21: -4.6
      - FY22: -9.4
      - FY23: -11.3
      - (Percent of GDP): FY18: -3.5; FY19: -1.5; FY20: -1.7; FY21: -1.3; FY22: -2.4; FY23: -2.6
    - Gross official reserves (billions of U.S. dollars) 2/:
      - FY18: 32.9
      - FY19: 32.7
      - FY20: 36.0
      - FY21: 46.4
      - FY22 (Proj.): 47.7
      - FY23 (Proj.): 45.5
      - In months of prospective imports of goods and services: FY18: 6.5; FY19: 7.0; FY20: 6.9
  - Exchange rate:
    - Taka per U.S. dollar; period average: FY18: 82.1; FY19: 84.0; FY20: 84.8
    - Taka per U.S. dollar; end-period: FY18: 83.7; FY19: 84.5; FY20: 84.9
  - Memorandum item:
    - Nominal GDP (billions of taka): FY18: 22,505; FY19: 25,425; FY20: 27,393; FY21: 30,284; FY22 (Proj.): 34,086; FY23 (Proj.): 38,610

*IMF Press Release No. 22/57 — "IMF Executive Board Concludes 2021 Article IV Consultation with Bangladesh" (March 3, 2022).*

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## References

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_Source: https://www.imf.org/en/news/articles/2022/03/03/pr2257-imf-executive-board-concludes-2021-article-iv-consultation-with-bangladesh_