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Dhaka Tribune

IMF: Unrest poses challenge for expansion

Update : 02 Dec 2013, 06:23 PM

The political turmoil is a challenge now for Bangladesh economy as it already slows down the economic growth of the country, observed International Monetary Fund.

 “Strikes and uncertainty associated with the upcoming elections, an attendant slowdown in growth, pose challenges ahead,” said IMF Deputy Managing Director Naoyuki Shinohara.

He came up with the observation as the lender completed the third review under the Extended Credit Facility Arrangement with Bangladesh on Sunday.

IMF approved $140.4m disbursement. With it, the total disbursement under the ECF now stands at nearly $561.4m. The three-year ECF arrangement for Bangladesh was approved by the executive board on April 11, 2012 for a total amount of about $982.5m, or 120% of quota.

While talking about Bangladesh’s political unrest, the global lender cautioned that it is important to persevere with a strong policy framework in the run-up to national elections and beyond.

It said the progress on macro-stabilisation and structural reforms has been strong under Bangladesh’s policy programme, supported by the ECF.

“International reserves have risen and underlying inflation is moderating. Progress has also been made in lowering subsidies, raising development spending, improving public financial and debt management, and strengthening financial supervision,” IMF stated.

About fiscal policy, the IMF said the policy should remain prudent and provide space to raise public investment and social-related spending.

“Further reforms to modernise the tax system and generate additional resources for development spending over the medium term are critical, with implementation of the new value added tax a priority.”

IMF viewed that the restrained monetary policy has curbed inflationary pressures and supported reserve accumulation.

“The stronger external position could allow scaling back foreign exchange intervention while continuing sterilisation efforts,” it said.

According to IMF, Bangladesh Bank should fully utilise its enhanced supervisory powers to bolster financial stability. The programme for reforms at the state-owned commercial banks should be firmly advanced, backed by recapitalisation, the lender added.

 “Reforms to achieve sustained and inclusive growth should aim at further removing critical infrastructure bottlenecks, while streamlining the trade regime and foreign exchange regulations to improve the business climate.”

 Advancing initiatives to strengthen labour and garment factory safety conditions is also critical, while the targeting of social safety net programmes needs to be further improved, the IMF said.

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