## Transcript of Press Briefing: IMF Executive Board Completion of First Review for IMF-Supported Program for Bangladesh and 2023 Article IV Consultation _IMF News, December 14, 2023_ ## Source details **Canonical URL:** [Transcript of Press Briefing: IMF Executive Board Completion of First Review for IMF-Supported Program for Bangladesh and 2023 Article IV Consultation](https://www.imf.org/en/news/articles/2023/12/15/tr121423-transcript-bangladesh-press-briefing-imf-exec-board-1st-rvw-supported-program-2023-art-iv) ## Other formats - [Markdown version](/en/news/articles/2023/12/15/tr121423-transcript-bangladesh-press-briefing-imf-exec-board-1st-rvw-supported-program-2023-art-iv/index.md) - [Structured JSON version](/en/news/articles/2023/12/15/tr121423-transcript-bangladesh-press-briefing-imf-exec-board-1st-rvw-supported-program-2023-art-iv/index.json) - [Bundle manifest](/en/news/articles/2023/12/15/tr121423-transcript-bangladesh-press-briefing-imf-exec-board-1st-rvw-supported-program-2023-art-iv/bundle-manifest.json) ## Bibliographic details - Published: December 14, 2023 --- ### Board decision and disbursements - The IMF Executive Board completed the first review of the IMF-supported program and the 2023 Article IV consultations on December 12. - Board approvals unlocked disbursements of about US $469 million of the second tranche of the Extended Credit Facility and the Extended Fund Facility, bringing the total disbursements under the ECF, EFF thus far to about $938 million US dollars. - The Board’s approval also unlocked about $222 million US dollars, as the first tranche of the Resilience and Sustainability Facility, RSF. ### Macroeconomic assessment and recent performance - Bangladesh faced external headwinds and an "unprecedented reversal of the financial account" that deteriorated the overall balance of payments in FY-23, pressuring FX reserves and the Taka. - The authorities’ policy response included tightened monetary policy, greater exchange rate flexibility, and unification of multiple exchange rates. - Overall program performance described as "broadly satisfactory" with "most program targets and reform commitments" met. - The staff report and a table of specific quantitative targets and structural benchmarks were published on imf.org and referenced in the briefing. ### Monetary policy, interest rates, and inflation - Bangladesh Bank began a tightening cycle in May 2022 and "cumulatively, they have raised the monetary policy by 300 basis points." - "Since October, they have raised the policy rates by almost 125 basis points." - Transmission effects: "the yield curves have moved up on an average by 200 basis points." - Reported yields: lower end of government treasury bills and bonds trading "around 10 percent," longer end trading "around 11.2 percent." - Current inflation reported as "9.5" (percent implied from context); pre-shock inflation target or comfort level is "5 percent to 6 percent." - Lending rate regime changes: - Bangladesh Bank removed lending/deposit caps; introduced lending tied to "the smart rate and then they widened the band around the smart rate cap." - New-loan lending rates noted as "above 11 percent." - Text references lending tied to "smart plus 375 basis points" in one explanation, and later refers to "there is a 350-basis point" band in another passage. ### Exchange rate flexibility and framework - IMF recommends greater exchange rate flexibility to absorb external shocks and rebuild external buffers. - A fully floating exchange rate is noted as requiring careful transitional steps; IMF and authorities are working on a crawling peg arrangement with a bank corridor as an intermediate/transitional step. - Staff report contains a "selected issues paper" with more detail on the proposed exchange rate framework. ### Fiscal policy, revenue, and public spending - Priority: raise tax revenues and rationalize non-priority expenditure to increase investment in social development and climate spending. - Bangladesh’s tax-to-GDP ratio described as "one of the lowest" and revenue mobilization is a core reform area. - Suggested tax-revenue measures include: tax expenditure rationalization, improving efficiency of tax administration, increasing the tax base, and digitalization. IMF technical assistance on tax expenditure noted (one mission has happened; another planned early next year). - Program includes a floor on social spending; authorities met the social spending floor for the first review. ### Structural reforms and growth-enhancing measures - Key reform areas identified: - Modernizing monetary policy framework and improving policy transmission. - Further modernization of the exchange rate framework and strengthening foreign exchange reserve management. - Addressing vulnerabilities in the financial sector: strengthen banking regulation, supervision, and governance. - Deepening capital markets to mobilize private financing. - Further trade liberalization and improvements in the investment climate to boost FDI and diversify exports. - Raise productivity via education and skills development; increase female labor force participation. - Improve efficiency in climate spending and mobilize climate financing. - Reform objectives linked to Bangladesh’s long-term goals: graduation from LDC status in 2026 and reaching upper-middle income status in 2031. ### Financial sector governance, AML/CFT, and anticorruption - Program priorities include fiscal governance improvements (public financial management, e-procurement, digitalization) and corporate governance in banks (fit-and-proper criteria, willful default definition under Bank Companies Act). - IMF is providing technical assistance on risk-based supervision of AML/CFT and is working closely with BIFU in Bangladesh Bank. - Strengthening of the anticorruption commission and providing adequate resources is mentioned as part of governance priorities. ### Exports, FDI, and competitiveness - Bangladesh exports are "very concentrated" by products and destinations; trade diversification is needed as some LDC-related trade preferences expire. - Policy tools to support diversification and competitiveness: tariff reforms, new tariff policy, boosting FDI (FDI to GDP ratio noted as "one of the lowest"), vocational training and skill development, and reducing gender gaps in labor force participation. ### Social protection and distributional concerns - IMF program emphasizes protecting the poor and vulnerable; social spending is a prioritized floor and was met in the first review. - Targeting of subsidies and better social-protection measures are underscored to ensure support reaches those most in need amid elevated inflation and price hikes. ### Program conditions, structural benchmarks, and next disbursement - Disbursement decisions linked to mutually agreed quantitative targets (net international reserves, primary balance, tax revenues, social spending, capital spending) and structural reform benchmarks listed in the staff report’s table. - Examples of structural benchmarks mentioned: revenue mobilization reforms, public financial management improvements, monetary policy modernization steps, adaptation of formula-based pricing for petroleum products, and integrating climate risks into financial sector surveillance. ### Reported communication lines and logistics - Press briefing was on the record; a press release had been issued earlier and the staff report was posted on imf.org (link posted by IMF staff during the briefing). - IMF Press Center is referenced as a password-protected site for working journalists. ### Closing takeaways (as summarized by IMF mission chief) - The program has supported authorities to preserve macroeconomic stability and protect the vulnerable despite significant challenges. - Near-term policy prescription: "a calibrated monetary policy tightening supported by neutral fiscal policy and greater exchange rate flexibility" to restore near-term macroeconomic stability and bolster external resilience. - Accelerating growth-oriented reforms is essential for meeting Bangladesh’s aspirations to reach upper middle-income status by 2031. *Transcript of Press Briefing published December 14, 2023 — IMF Communications Department* --- ## References - [PRESS CENTER](http://presscenter.imf.org/) - [https://www.imf.org/en/home](https://www.imf.org/en/home) _Source: https://www.imf.org/en/news/articles/2023/12/15/tr121423-transcript-bangladesh-press-briefing-imf-exec-board-1st-rvw-supported-program-2023-art-iv_