BSS, Dhaka :
The International Monetary Fund (IMF) on Tuesday forecast steady growth outlook for Bangladesh despite the persistent political violence by the BNP-Jamaat alliance.
“For FY15 (July 2014-June 2015) as a whole, we expect real GDP to grow by about 6.0 percent, should calm be restored and uncertainty abated, growth should strengthen to 6.5 percent in FY16 (financial year 2015-16)”, IMF mission chief Rodrigo Cubero told a press briefing, held at the finance ministry.
Rodrigo Cubero, deputy division chief in the Asia and Pacific Department, led the six-member 5th ECF (extended credit facility) review mission to Dhaka from February 25-March 10, which also included Souvik Gupta, Lynge Nielsen, Soharb Rafiq, Andrew Edward Hodge, Stella Kaendera.
Cubero said the economic activities in Bangladesh maintained momentum this year, buoyed by robust domestic demand. He also attributed the economic dynamism to the phenomenal rise in foreign exchange reserve, which hit the highest ever record of $23 billion last month.
The mission chief, however, noted the ongoing political unrest as a matter of concern saying, “The resurgence of unrest in recent months is taking a toll on the economy.”
Besides, he said inflation eased against lower food prices, but faces upside risks from unrest-related supply disruption. Resultantly, he cautioned, the external current account is expected to shift to a deficit on the heels of strong import growth and a moderation in exports.”
To evade the risks and support strong growth with sustained poverty reduction, he said it would be necessary to preserve macroeconomic stability and create fiscal space to boost critical power and transport infrastructure investment and well-targeted social spending.
“This in turn, will require much higher fiscal revenue,” Cubero said, but noted that Bangladesh has one of the lowest tax-to-GDP ratio in the world.
For coming out of the low tax-to-GDP ratio, Cubero said the implementation of the new VAT low would be helpful to increase revenue earnings significantly while it would reduce taxpayers harassment and compliance costs for business, protect small business through a minimum threshold and shield poor households through exemption of basic consumption items.
Cubero said strengthening financial system is another priority to safeguard stability and boost growth. In this regard, IMF mission admitted that Bangladesh Bank (BB) is committed to strictly enforce prudential regulations and improvement in governance and risk management, particularly in state-owned banks.
Following a meeting with the IMF mission on Monday, Finance Minister AMA Muhith told journalists the government would go for imposing one rate of VAT apparently complying with the suggestion of IMF as the new VAT law is going to be effective from first of July of 2016.
Cubero welcomed the government’s strong commitment to launching the new VAT and said this effort should be complemented by further progress in modernising and automating tax revenue administration and by enhanced taxpayers’ education.
The mission also welcomes the progress made in improving working conditions in the garment industry, and steps taken to enhance the investment climate, including by liberalizing foreign exchange regulations on current account transactions.
“These efforts will further contribute to support high, inclusive growth,” the mission chief said.
Regarding release of the last two tranches of the ECF loan, Cubero said the government authorities and the mission reached a ‘staff-level understanding’ on the completion of the fifth and the sixth reviews under the ECF arrangement. These staff- level understandings are subject to review by the management and executive board of the IMF.
The finance minister, however, said on Monday that the IMF would release the last tranches of loan $280 million by June this year.
The three-year ECF arrangement for Bangladesh was approved by the IMF Executive Board on April 11, 2012 for a total amount equivalent to US$986 million. The lending arm of the World Bank already released most of the ECF in four installments, but deferred disbursement of last two installments on the issue of reforming VAT (value added tax) law.
During the Dhaka visit, the mission held separate meetings with the finance minister, BB’s governor and deputy governors, the National Board of Revenue (NBR) and some other stakeholders, including development partners and the private sector.
At the meeting the mission had discussions on various issues including policy reform in the tax administration, performance of the banking sector, monetary policy statement, risk management and governance in the financial sector and the status of the large borrowers.
Earlier, Rodrigo Cubero led a mission to Dhaka from September 17-30, 2014 to conduct discussions on the fifth review under a three-year ECF arrangement. Following the review, the mission issued a statement where it said Bangladesh made significant progress in consolidating macroeconomic stability under the ECF- supported programme.
The International Monetary Fund (IMF) on Tuesday forecast steady growth outlook for Bangladesh despite the persistent political violence by the BNP-Jamaat alliance.
“For FY15 (July 2014-June 2015) as a whole, we expect real GDP to grow by about 6.0 percent, should calm be restored and uncertainty abated, growth should strengthen to 6.5 percent in FY16 (financial year 2015-16)”, IMF mission chief Rodrigo Cubero told a press briefing, held at the finance ministry.
Rodrigo Cubero, deputy division chief in the Asia and Pacific Department, led the six-member 5th ECF (extended credit facility) review mission to Dhaka from February 25-March 10, which also included Souvik Gupta, Lynge Nielsen, Soharb Rafiq, Andrew Edward Hodge, Stella Kaendera.
Cubero said the economic activities in Bangladesh maintained momentum this year, buoyed by robust domestic demand. He also attributed the economic dynamism to the phenomenal rise in foreign exchange reserve, which hit the highest ever record of $23 billion last month.
The mission chief, however, noted the ongoing political unrest as a matter of concern saying, “The resurgence of unrest in recent months is taking a toll on the economy.”
Besides, he said inflation eased against lower food prices, but faces upside risks from unrest-related supply disruption. Resultantly, he cautioned, the external current account is expected to shift to a deficit on the heels of strong import growth and a moderation in exports.”
To evade the risks and support strong growth with sustained poverty reduction, he said it would be necessary to preserve macroeconomic stability and create fiscal space to boost critical power and transport infrastructure investment and well-targeted social spending.
“This in turn, will require much higher fiscal revenue,” Cubero said, but noted that Bangladesh has one of the lowest tax-to-GDP ratio in the world.
For coming out of the low tax-to-GDP ratio, Cubero said the implementation of the new VAT low would be helpful to increase revenue earnings significantly while it would reduce taxpayers harassment and compliance costs for business, protect small business through a minimum threshold and shield poor households through exemption of basic consumption items.
Cubero said strengthening financial system is another priority to safeguard stability and boost growth. In this regard, IMF mission admitted that Bangladesh Bank (BB) is committed to strictly enforce prudential regulations and improvement in governance and risk management, particularly in state-owned banks.
Following a meeting with the IMF mission on Monday, Finance Minister AMA Muhith told journalists the government would go for imposing one rate of VAT apparently complying with the suggestion of IMF as the new VAT law is going to be effective from first of July of 2016.
Cubero welcomed the government’s strong commitment to launching the new VAT and said this effort should be complemented by further progress in modernising and automating tax revenue administration and by enhanced taxpayers’ education.
The mission also welcomes the progress made in improving working conditions in the garment industry, and steps taken to enhance the investment climate, including by liberalizing foreign exchange regulations on current account transactions.
“These efforts will further contribute to support high, inclusive growth,” the mission chief said.
Regarding release of the last two tranches of the ECF loan, Cubero said the government authorities and the mission reached a ‘staff-level understanding’ on the completion of the fifth and the sixth reviews under the ECF arrangement. These staff- level understandings are subject to review by the management and executive board of the IMF.
The finance minister, however, said on Monday that the IMF would release the last tranches of loan $280 million by June this year.
The three-year ECF arrangement for Bangladesh was approved by the IMF Executive Board on April 11, 2012 for a total amount equivalent to US$986 million. The lending arm of the World Bank already released most of the ECF in four installments, but deferred disbursement of last two installments on the issue of reforming VAT (value added tax) law.
During the Dhaka visit, the mission held separate meetings with the finance minister, BB’s governor and deputy governors, the National Board of Revenue (NBR) and some other stakeholders, including development partners and the private sector.
At the meeting the mission had discussions on various issues including policy reform in the tax administration, performance of the banking sector, monetary policy statement, risk management and governance in the financial sector and the status of the large borrowers.
Earlier, Rodrigo Cubero led a mission to Dhaka from September 17-30, 2014 to conduct discussions on the fifth review under a three-year ECF arrangement. Following the review, the mission issued a statement where it said Bangladesh made significant progress in consolidating macroeconomic stability under the ECF- supported programme.
