IMF for reforms to make Bangladesh economy more resilient

The International Monetary Fund (IMF) has emphasised continuing reforms to make Bangladesh’s economy more resilient and resuming progress towards the authorities’ ambition of reaching upper middle-income status.

“In the past decade, Bangladesh achieved impressive economic growth and social development, making steady progress in reducing poverty and across many indicators of the Sustainable Development Goals (SDGs). The pandemic interrupted this long period of robust economic performance. Nevertheless, Bangladesh’s favorable demographics present a significant opportunity,” said IMF Mission Chief for Bangladesh Rahul Anand said in an interview via email.

To harness this potential, he said, the country must continue reforms to make its economy more resilient and resume progress towards the authorities’ ambition of reaching upper middle-income status.

Anand said foremost in this reform effort is the long-standing challenge of raising tax revenues, which is critical to increase public investments to support the poor and vulnerable people.

“This will require modernisation of the tax system and improvements in revenue collection, for instance, by simplifying the VAT rate structure and tackling implementation challenges. Financial sector reforms to enhance banking regulation and supervision and improved corporate governance and legal systems remain important. Maintaining robust economic performance will also require an increase in productive investments supported by a modernized policy framework,” he added.

The IMF mission chief mentioned that these reforms, combined with efforts to boost private investments and export diversification, will help create conditions to make Bangladesh’s economy more resilient and support long-term, inclusive and sustainable growth.

Anand, however, said Bangladesh authorities reacted quickly and decisively in response to the pandemic.

“Supportive monetary and fiscal policies along with a sustained pick up in exports have enabled Bangladesh’s recovery. Growth is expected to be 6.5 percent in FY22 . . . As the external environment improves and the domestic vaccination program progresses, growth is expected to increase to above 7 percent in FY23,” he added.

He said efforts should focus on scaling-up vaccine donations and prioritizing deliveries to countries that lack access.

Anand informed that the IMF introduced a plan, jointly endorsed by the World Bank, World Health Organization (WHO) and World Trade Organization (WTO), that lays out concrete steps to vaccinate at least 40 percent of the population in each country by the end of this year and 70 percent by mid-2022.

“This requires additional financing for low- and middle-income countries, with a very significant proportion in the form of grants and concessional financing. This should be reinforced with removals of the remaining restrictions on exports of medical equipment, raw materials and finished vaccines,” he added.

He said initiatives by the IMF and the international community - such as the recent allocation of Special Drawing Rights and the Debt Service Suspension Initiative -are helping avoid even larger reductions in essential health-related spending while meeting their external payment obligations, including vaccine financing.