The International Monetary Fund (IMF) yesterday disbursed a loan of about US$258.3 million – the last instalment under an Extended Credit Facility (ECF) arrangement for Bangladesh.
The disbursement decision was taken by the executive board yesterday, after completing the fifth and sixth reviews of Bangladesh’s economic program under a three-year arrangement, said a press release.
The arrangement was approved on April 11, 2012 for a total amount of about US$904.2 million or 120 percent of quota. The arrangement was extended first to July 31 and then to October 31, 2015.
Following the board discussion, Mitsuhiro Furusawa, Deputy Managing Director and Acting Chair, issued a statement, saying: “Prudent macroeconomic policies and structural reforms, with support from the Extended Credit Facility (ECF) arrangement, have helped steer the Bangladesh economy through domestic and global challenges in the last three and a half years.”
It said growth has been robust, inflation has eased, foreign exchange reserves have risen to a comfortable position, and public debt has remained stable as a share of GDP. Against a challenging and uncertain global landscape and upside inflation risks, the authorities should maintain prudent fiscal and monetary policies to underpin sustained high growth, build resilience to shocks, and further reduce poverty.
“Structural reforms will also play an important role in unleashing the full potential of the economy,” said the statement. “Many important reforms were adopted under the ECF arrangement.”
Key structural challenges remain, it said however. “Bangladesh’s already low tax-to-GDP ratio declined steadily since fiscal year 2012–13. Boosting revenue is necessary to maintain fiscal sustainability and build fiscal space for public investment in critical infrastructure and stronger social safety nets.”
To this end, it said, the authorities should steadfastly implement the new value-added tax (VAT) for a launch by July 2016. The new VAT will simplify tax administration and lower taxpayers’ compliance costs, and it is designed to protect the poor and small businesses.
The statement said further reducing inefficient and regressive energy subsidies, including by aligning domestic fuel prices with international prices, and strengthening financial management and reporting in state-owned enterprises, would also open up space to increase well-targeted social spending.
“Another important priority is to continue to strengthen the resilience of the banking sector. State-owned banks, in particular, should be reformed and guided by good corporate governance practices, supported by complete branch automation by 2016.
