IMF praises reform efforts
Breaking with tradition, the IMF has praised various reform initiatives of the government and agreed to release the fourth instalment of a $1 billion loan in December.
The government does not need to go for an immediate hike in energy prices to shake off its subsidy burden, the International Monetary Fund said.
The lender also backs a government move to recapitalise the cash-strapped state banks.
The fourth instalment, $140.5 million, would be made available after an approval of the IMF's executive board by the yearend, Rodrigo Cubero, chief of a review mission of the lender, told reporters at the Bangladesh Bank headquarters in Dhaka yesterday.
After the release of the amount, the total disbursement under an Extended Credit Facility (ECF) programme would stand at $562.3 million.
However, the IMF said political unrest and uncertainty in the run-up to the elections might affect economic activities by disrupting supply and curbing investment demand.
The lender thinks Bangladesh's GDP (gross domestic product) growth would slip below 6 percent this fiscal year.
The IMF team came to Dhaka on September 22 to hold bilateral discussions with the government and conduct the third review under the three-year ECF arrangement, approved in April last year.
The IMF said Bangladesh has made substantial progress in strengthening macroeconomic policies under the ECF arrangement.
“Bangladesh is now in a better position to withstand adverse shocks, with international reserve levels doubling the lows in late 2011 and inflation pressures easing, a result of prudent monetary and fiscal policies,” Cubero said in a statement.
“Quantitative targets under the ECF are on track, with all performance criteria met at end-June 2013,” he said.
There has also been significant progress in structural reforms, such as the new value added tax (VAT) and amendments to the Banking Companies Act, said the review mission chief.
Cubero said the mission held discussions with the finance minister, central bank governor and other senior government officials on policies to safeguard achievements and put the economy on a sound footing.
He said Bangladesh remains committed to keeping the budget deficit within 4.3 percent of GDP, and to do so, it has boosted tax collections.
The authorities will address weaknesses in the operational efficiency and financial management of state-owned enterprises.
The IMF said the amendments to the Banking Companies Act would give the BB stronger regulatory and supervisory powers.
The mission also welcomed the government's plans -- in coordination with development partners, business community, labour unions and international buyers -- to improve the working conditions and strengthen the safety standards for workers in Bangladesh.