IMF
Budget not based on IMF conditions: Finance Minister
Bangladesh's Finance Minister AHM Mustafa Kamal has said that the national budget for the fiscal year (FY) 2023-24 was not based on the conditions of the International Monetary Fund (IMF).
"Like in different countries, the IMF has come to Bangladesh and made some recommendations to help the economy. We took their prescriptions as per our needs, but did not follow them all in preparing the budget," he said while addressing a post-budget press conference at the Bangabandhu International Conference Centre (BICC) in the city on Friday (June 2, 2023).
He said the IMF is not helping the countries only by providing money, they also monitor the economy. This is good for the economy.
Responding to a repeated number of questions on inflation and commodity price hike, the finance minister said the government is concerned about the rising trend in inflation.
Read more: Unrealistic budget won’t help overcome economic crisis: Fakhrul
"We're apprehensive about inflation, but it is not beyond our control. We cannot stop feeding the people," he said.
He said the government is approaching in a flexible way to contain inflation. Through social safety-net programmes, the government has been providing food to poor people.
"We're trying to identify the reasons for inflation and address those. If we need to give any concession, we will do that," he said.
Agriculture Minister Abdur Razzaque, LGRD Minister Tajul Islam, Education Minister Dipu Moni, Commerce Minister Tipu Munshi, Finance Secretary Fatima Yasmin, Bangladesh Bank Governor Abdur Rouf Talukder, and National Board of Revenue (NBR) Chairman Abu Hena Rahmatul Munim were among others also addressed on the occasion.
Read more: CPD dismisses budget's projections on growth, inflation, revenue collection
The Finance Minister claimed that the new budget was mainly focused on benefiting the poor people.
"We have expanded our tax net so that more taxes could be collected. Everybody has to pay tax," he said, adding that like other budgets in the past this was also prepared targeting both the next election and the people.
"We cannot separate the people or the election from our goal of the budget," he said.
Responding to another question, he said that all the projections made in the previous budgets were implemented.
Kamal said Bangladesh has been well placed in remittance earnings among the countries in the region.
Read more: Budget 2023-24: Govt allocates Tk88,162 crore in education sector, up 8.2%
After a downward trend, remittance earning is again increasing and we can meet five months of our import bill through our reserve.
He said after some measures taken by the government, the inflow of remittance will gradually go up.
At the press conference, with the request of the Finance Minister, Bangladesh Governor Abdur Rouf Talukder responded to a good number of questions, specially, on inflation, remittance and banking sector.
He said that Bangladesh Bank will announce its monetary policy on June 19 where it will lay out the plan on containing inflation, and increasing remittance and reserve.
He claimed that though the government's loan from the banking system is increasing, it will not push up inflation as the central bank is withdrawing more money from the market through selling dollars.
Read more: Budget sets 7.5 percent annual economic growth, inflation at 6 percent
Budget FY23-24: Focus should be on tackling macroeconomic challenges, says Dr Atiur Rahman
Bangladesh's upcoming national budget for FY23-24 should focus on macroeconomic challenges such as taming inflation, better revenue collection, rein in growing defaulted loans and IMF-suggested reforms.
This was stated by Dr Atiur Rahman, former governor of Bangladesh Bank in conversion with UNB on the expectations from the budget to be placed in parliament on June 1.
Dr Atiur said budget will certainly have to address a number of macroeconomic challenges. The foremost is, of course, the inflation which is still running high at more than nine percent.
“Bringing this down to 6.5 percent in the next fiscal year may not be easy unless we go fast towards market-based solutions of major macroeconomic challenges arising out of administratively controlled indicators like rate of interest and foreign exchange rates,” he said.
Read more: Tk337.60 crore budget for FY2023-24 approved for placing in Parliament
Thanks to the IMF programme, the budget may encourage regulatory authorities to go for an ‘interest rate corridor’ and a ‘single exchange rate’ that are long overdue. If we could have followed this time- tested path of market-driven macroeconomic management many of the ongoing challenges would have been addressed by now, said the development economist.
“Yet, it is better late than never,” he said adding “Of course, some sectors like agriculture, export and remittances would still need fiscal support and they must continue to get it.”
This, he said, will be desired support to the real economy which can contribute towards easing supply-side constraints to reduce inflation to some extent.
However, constraining demand pressure by raising interest rates still remains a major move to reduce inflation. “I hope the macroeconomic managers would like to take this prudent path in the next fiscal year without any hesitation.”
Read more: Curbing inflation without destabilising macroeconomic situation presents challenge for budget: Selim Raihan
He said the rich are currently enjoying huge advantages of negative rate of interest when adjusted against inflation rate may raise political economic hurdles against such a move. But the gains of long-term macroeconomic stability must guide the policy makers to overcome such pressures, said Dr. Atiur.
“I think one must not look at IMF conditionalities negatively as the budget makers have also been flagging such reforms for quite some years. The local economists in general have also been arguing for a more balanced budget with manageable deficits,” he said.
Bangladesh, of course, has done pretty well in maintaining budget deficits around five percent. This year it may go above five percent (5.3%) which is not that bad.
“To maintain this level of budget deficit we need to raise our domestic resources by reforming our tax administration system through higher levels of digitalization and a more efficient tax system,” Dr Atiur said.
Read more: Tk 75,000cr revenue shortfall to widen current fiscal’s budget deficit: CPD
The banking system has been well digitised in the meantime. Why should the NBR not take advantage of this modernisation of the money market and replicate a fully digital revenue administration system?, he questioned.
Since the inflation remains very high, the fiscal measures for higher levels of social security for the extreme poor and lower income groups in terms of higher food subsidies and support for agriculture must continue in the upcoming budget as well. Strategic support for digital infrastructures for making the economy smarter must also be the cornerstone of the next budget, he pointed out.
“Simultaneously, we must keep our budget as cautious as possible to restrain the inflationary outlook,” he noted.
Read more: Inflation, revenue shortfall, dollar crisis the major challenges for economy ahead of election-year budget
Curbing inflation without destabilising macroeconomic situation presents challenge for budget: Selim Raihan
Economist Dr Selim Raihan believes the National Budget of Bangladesh for the fiscal year 2023-24 is being presented at a difficult time, when it will be a challenge to devise policies to manage inflation while also maintaining a stable macroeconomic situation,
Dr Selim Raihan is Professor at the Department of Economics, University of Dhaka, and the Executive Director of the South Asian Network on Economic Modeling (SANEM).
Talking with UNB on the upcoming budget, Dr Raihan pointed out two major challenges--controlling inflation and macroeconomic management for the upcoming budget.
“Higher inflation for a long time creates instability in the domestic markets and lower-income people are affected severely,” he said.
Read more: No new pay scale, govt employees to get 20% dearness allowance in new budget
The government’s measures to cut inflation have not proved effective, so new measures to reduce inflation need to be included in the budget, he opined.
Dr Raihan said the monetary policy is not working to curb inflation as there is a mismatch with interest rates - the continued delay in withdrawing the interest rate caps also prolongs inflation.
Besides, a big challenge of domestic market management is that government agencies could not implement effective market management against monopoly businesses.
As a result, prices of many essential items are higher in the domestic market relative to the global market. Notably, prices of some items increase in Bangladesh at the same time that there is a downward trend in the international market, said Dr Raihan.
Read more: No let-up in safe drinking water scarcity in Khulna’s Dacop
Regarding macroeconomic management, he said reducing the defaulted loans and achieving the revenue collection target are big factors for stability.
Forex reserves management and foreign exchange rate fluctuation also worked for instability of the macroeconomic situation, which are required to make it stable, he said.
The International Monetary Fund (IMF) gave conditions for reducing defaulted loans to a desired level, but the latest update revealed no headway in that regard, which Dr Raihan said was alarming.
The IMF’s desired target of increasing the tax GDP ratio by 0.5 percent each year, till the 2025-26 fiscal, is also proving a challenge for the National Board of Revenue.
Read more: Inflation, revenue shortfall, dollar crisis the major challenges for economy ahead of election-year budget
The SANEM chief said although the revenue collection target increased every year in the budget, in the absence of any coherent plan and institutional capacity-building initiatives for NBR, there is almost no progress towards attaining those targets. In fact, the revenue collection shortfall keeps getting wider, he pointed out.
Dr Raihan suggested joint initiatives of Bangladesh Bank and the Ministry of Finance to reduce the defaulted loans, saying the central bank alone cannot handle the issue.
He also sought the central bank’s effective measures to ensure good governance in the banking sector, averting the pressure of any influential group.
Dr Raihan also suggested increasing allocation and coverage under the social safety net, to ease the woes of vulnerable groups.
Read more: Bank default loans surge to Tk1.31 lakh crore: BB
Inflation, revenue shortfall, dollar crisis the major challenges for economy ahead of election-year budget
Preparations for Bangladesh's national budget for the 2023-24 fiscal must balance expectations in an election year with the conditions of the International Monetary Fund (IMF), and tackle inflation, foreign exchange crisis and revenue shortfall.
Balancing public satisfaction and protecting the economy is a major issue. Economists say it has been seen in the past that election year budgets often prioritise public satisfaction over the improvement of the economy.
As such, the opportunity to deliver a budget that is satisfactory is very limited, said macroeconomist and public policy analyst Dr Debapriya Bhattacharya, who is also a Distinguished Fellow at the Centre for Policy Dialogue (CPD).
Read more: Safeguards are needed to protect vulnerable people under IMF-backed reforms: Debapriya
He told UNB, "Before the election, all governments want to give a budget that satisfies the people. But due to the financial situation, fiscal deficit, and trade deficit, the opportunity is very limited for the government. If such a big effort is made, it will have a negative impact on the overall economy."
"It is important to remember that this budget will be implemented by two governments. In this budget, flexibility must also be preserved. Because, if the government makes any big promises, there is doubt as to how much they can implement," he pointed out.
Dr Debapriya said that the budget is coming at a time of political uncertainty in the country. Plus exit from LDC, and the Covid-19 response revival are issues hanging over the budget.
Also read: 11pc of Bangladesh budget allocated for disaster risk reduction: State Minister
“Compared to any other year, this year's budget has to be prepared in a very complicated situation. Because earlier, there would be a deficit in terms of income and expenditure in the country, but there would be comparative relief in terms of foreign transactions. But this time it is not,” he opined.
Dr Debapriya said, "There has been a major disruption in the growth rate. It is going down further because there is no money, no dollar. There is a huge deficit in both areas to be dealt with together.”
So the government has to control imports and limit its investment program. As a result, next year's growth target should also be moderated.
Read more: Despite many challenges, Bangladesh remains one of the fastest growing economies in Asia-Pacific: Visiting IMF team
"The financial structure has actually weakened," he said.
Executive Director of the South Asian Network on Economic Modeling (SANEM) Salim Raihan, also a professor of economics at Dhaka University (DU), said that in the previous election years, the economy was not in such a crisis as this time.
"As a result, no new major pressure was created in the economy despite budgeting for public satisfaction at that time. But this time, if the budget is made considering only public satisfaction in view of the election, it will create new pressure on the economy," Professor Raihan said.
Read more: Bangladesh’s GDP growth rate will overtake China’s in current fiscal year, IMF predicts
Safeguards are needed to protect vulnerable people under IMF-backed reforms: Debapriya
Debapriya Bhattacharya, public policy analyst and distinguished fellow of Centre for Policy Dialogue (CPD), said on Monday that when the IMF takes a reform programme for a country, sometimes inequality increases, because of the conditions they attach.
So, safeguards are needed when the IMF is involved in any major reform agenda, said the prominent economist.
He made the statement in a dialogue of the CPD-Citizen Platform titled 'How the concern of disadvantaged people can be reflected in the upcoming national budget during the IMF reform period’, held at Bangabandhu International Conference Centre (BICC) in the capital on Monday.
Presenting a keynote paper on the topic Debapriya said, when the IMF programme is taking place in a country, it tries to impose an authority on the economy of that country. Similarly, in Bangladesh the global lender imposed conditions of cutting subsidies on energy, electricity, advocated for market-based foreign exchange and interest rates, which could trigger sufferings of the disadvantaged groups.
In addition, the IMF has spoken of additional tax-revenue collection. Debapriya said.
He said there is no room to disagree with this, but from whom the tax will be collected, that is a big question.
He also complained that there is no standard system of tax collection in the country so far.
Planning minister MA Mannan was present in the function as the chief guest while Rana Mohammad Sohail MP, member of parliamentary standing committee on finance ministry and barrister Rumeen Farhana, an ex-MP of the current parliament from BNP, were present as the special guests.
Advocate Sultana Kamal chaired the discussion while former NBR Chairman Dr Muhammad Abdu Mazid, economist professor Mustafizur Rahman, CPD’s executive director Dr Fahmida Khatun, among others, spoke in the function.
Representatives of different disadvantaged groups including old aged, youth leaders, students, physically challenged people, farmers, tribal groups, fishermen, women and cleaners’ community were present.
Planning minister MA Mannan said despite efforts made by members of the parliament, the government's allocation often fails to reach the country's underprivileged people.
The minister emphasised on how the underprivileged were deprived in different sectors. But Prime Minister Sheikh Hasina understands the sufferings of the disadvantaged groups and she is trying to allocate more in the budget to save them, he said.
"Bangladesh is not dependent on the International Monetary Fund [IMF]. The budget is entirely the government's own plan. The IMF is merely a side-actor," he said.
The minister also highlighted inflation as the biggest challenge at the moment, though he noted that it had slightly decreased last month.
Debapriya said, according to the data of the Bureau of Statistics, poverty has decreased but inequality has increased. The disparity has also increased, alongside consumption inequality, he said.
He, however, noted that data on wealth inequality was not available. He also expressed doubts about how much reform could be done depending on indirect taxes.
Debapriya recommended the government should maintain a balance between sectors in terms of reforms and sectoral disparity.
He also emphasised on the need to raise direct taxes to minimise the tax burden on the lower income group of people.
Despite many challenges, Bangladesh remains one of the fastest growing economies in Asia-Pacific: Visiting IMF team
The visiting team of International Monetary Fund (IMF) has said that despite many challenges, Bangladesh’s growth is progressive.
In a statement released on Sunday, Rahul Anand, IMF Mission Chief for Bangladesh, said: “Against a challenging economic backdrop, Bangladesh remains one of the fastest growing economies in the Asia-Pacific region. However, persistent inflationary pressures, elevated volatility of global financial conditions, and slowdown in major advanced trading partners continue to weigh on growth, foreign currency reserves, and the Taka.”
Also Read: IMF satisfied with progress of BBS’ GDP and inflation data updated under new method
The team led by Anand arrived in Dhaka on April 25 to discuss recent macroeconomic and financial sector developments. The delegation also went over the progress made towards meeting key commitments under the IMF-supported program.
Also Read: Bangladesh’s GDP growth rate will overtake China’s in current fiscal year, IMF predicts
“This will be formally assessed in the first review of the Extended Credit Facility (ECF) / Extended Fund Facility (EFF) / Resilience and Sustainability Facility (RSF) arrangements, which is expected to be undertaken later this year,” Anand’s statement said.
Also Read: Preparing next budget a daunting task amid IMF pressure, global economic slowdown, speakers tell ERF workshop
During the visit, the IMF team held meetings with Bangladesh Bank Governor Abdur Rouf Talukder, Finance Secretary Fatima Yasmin, and other senior government and Bangladesh Bank officials. The delegation also met with representatives from the private sector, bilateral donors and development partners.
Bangladesh’s GDP growth rate will overtake China’s in current fiscal year, IMF predicts
The latest report of the Internal Monetary Fund (IMF) on Asia-Pacific region forecasts that Bangladesh's GDP growth rate in the current fiscal year will overtake that of China.
The report also predicts that Bangladesh will be in second place, after Vietnam, in terms of GDP growth rate in Asia-Pacific in the next fiscal year.
According to the IMF's Regional Economic Outlook for Asia and Pacific May 2023 report, Bangladesh is expected to surpass both China and India in terms of growth in 2024.
In Bangladesh, GDP growth rate will slow down to 5.5 percent in 2023 because of demand-management measures, which is still higher than China's projected growth rate of 5.2 percent.
Read more: Bangladesh's GDP growth expected to pick up to 6.2% in FY2024: World Bank
But the economy of China is much bigger than that of Bangladesh.
The IMF report suggests that the recently approved Extended Fund Facility for Bangladesh will help address economic challenges caused by Russia's war in Ukraine, and the Resilience and Sustainability Facility arrangement will expand fiscal space to finance climate investment priorities and build resilience against long-term climate risks.
The report highlights the importance of international cooperation, particularly in securing financial assistance for climate change adaptation in vulnerable emerging markets in the region, including Bangladesh and the Pacific Islands.
Read More: Govt struggles to lift tax-GDP ratio to double digits
IMF says inflation to slow growth across Mideast this year
Economies across the Middle East and Central Asia will likely slow this year as persistently high inflation and rising interest rates bite into their post-pandemic gains, the International Monetary Fund said Wednesday.
The IMF's Regional Economic Outlook blamed in part rising energy costs, as well as elevated food prices, for the estimated slower growth. The report said that while oil-dependent economies of the Gulf Arab states and others in the region have reaped the benefits of elevated crude prices, other countries — such as Pakistan — have seen growth collapse after an unprecedented flooding last summer or as economic woes worsened.
The regional slowdown also comes as an explosion of fighting in Sudan between two top rival generals — who only a year ago as allies orchestrated a military coup that upended the African country's transition to democracy — threatens a nation where IMF and World Bank debt relief remains on hold.
Rising interest rates, used by central banks worldwide to try to stem inflation's rise, increase the costs of borrowing money. That will affect nations carrying heavier debts, the IMF warned.
Also Read: IMF satisfied with progress of BBS’ GDP and inflation data updated under new method
“This year we’re seeing inflation again being the most challenging issue for most of the countries," Jihad Azour, the director of the Middle East and Central Asia Department at the IMF, told The Associated Press. "For those who have high level of debt, the challenge of increase in interest rate globally, as well as also the tightening of monetary policy, is affecting them.”
The IMF forecast predicts regional growth will drop from 5.3% last year to 3.1% this year. Overall, regional inflation is expected to be at 14.8%, unchanged from last year, as Russia's war on Ukraine continues to pressure global food supplies and affect energy markets.
It will be even worse in Pakistan, where the IMF projected inflation to more than double, to about 27%. Pakistan and IMF officials have held repeated talks over the release of a stalled key tranche of a $6 billion bailout package loan to Islamabad.
The IMF warned that financial conditions worldwide will tighten this year, brought on in part by two bank failures in the United States in March. The sudden collapse of Credit Suisse before it was purchased by UBS also strained markets.
For Sudan, Azour acknowledged the challenge as the country faces a humanitarian crisis brought on by the weeks of fighting there. The violence has also worsened a debt crisis that has gripped the country for decades as it faced Western sanctions.
“We have worked with the government of Sudan, for the Sudanese people, in order to help them by achieving a debt operation that would allow Sudan to have a debt relief of more than $50 billion," Azour said.
"But unfortunately, the recent developments ... put in a halt to all of of those efforts,” he added.
Bangladesh took loan from IMF as a ‘breathing space’: PM tells IMF MD
Prime Minister Sheikh Hasina on Saturday (April 29, 2023) said that Bangladesh has taken a loan from the International Monetary Fund (IMF) as a "breathing space".
The Prime Minister said this while an IMF delegation led by its Managing Director Kristalina Georgieva paid a courtesy call on her at the meeting room of The Ritz-Carlton hotel here.
The IMF in January this year approved a loan of USD 4.7 billion for Bangladesh.
Foreign Minister Dr AK Abdul Momen briefed reporters after the meeting.
Also Read: PM Hasina arrives in Washington DC
He said that the IMF MD highly praised the unprecedented advancement of Bangladesh in various sectors under the dynamic leadership of Sheikh Hasina which made the Bangladesh economy stable after the Covid-19 pandemic.
The IMF chief also said leadership like the Bangladesh PM is necessary to take countries towards prosperity, confronting all hurdles, Momen told reporters.
She said that Bangladesh has achieved remarkable progress due to massive infrastructure development, ensuring connectivity, and maintaining law and order.
Bangladesh's Prime Minister briefed the IMF chief of her government’s initiatives to ensure the overall development of her country.
Also Read: Extend more support for Rohingya: PM Hasina urges int’l community
"The development of the country didn’t happen in a day, rather it’s the result of longtime planning and work," the PM was quoted as saying.
She said that she prepared the plan on how she wanted to develop Bangladesh while she was in jail after a military-backed caretaker government assumed power in the political changeover of 2007, and started working with the plan after assuming power for the second time in 2009.
Sheikh Hasina also mentioned various steps of the government to fight the adverse impacts of climate change and to ensure women’s empowerment.
Bangladesh Bank Governor Abdur Rouf Talukder said the IMF has always stood by Bangladesh over the last 14 years to maintain stability in the macro economy.
Read More: Bangladesh likely to get back the money borrowed by Sri Lanka: FM
He said that Bangladesh is currently engaged in a programme of USD 4.7 billion with IMF which the country got after only two weeks’ negotiation despite the fact that many countries cannot avail loan after negotiation for years.
"The IMF will continue such cooperation in the future," Rouf said, quoting the IMF chief.
He said that the Prime Minister hailed the role of IMF in the journey of Bangladesh's development and wished for continued support in future.
Senior Secretary of Finance Division Fatima Yasmin and Economic Relations Division Secretary Sharifa Khan were present during the briefing.
Read More: IMF loan program can be touchstone of financial sector reforms
According to a statement of IMF in January, Bangladesh will get this $4.7 billion loan in seven installments over the next 42 months. The average interest on the loan will be 2.2 percent.
Of the total amount, $3.3 billion will be available from the IMF’s ‘Enhanced Credit Support’ while $1.4 billion will come under the ‘Resilience and Sensibility Facility’.
The IMF had said that the loan will help stabilise Bangladesh's macroeconomy, implement necessary reforms to build capacity for social and development spending, strengthen the financial sector, modernise policy frameworks and address climate change.
The lending agency said that Bangladesh’s robust economic recovery from the pandemic has been interrupted by Russia’s war in Ukraine, leading to a sharp widening of Bangladesh’s current account deficit, depreciation of the taka and a decline in foreign exchange reserves.
Read More: IMF-Bangladesh Bank meeting prioritizes unified exchange rate and competitive lending rate
It further said that the authorities have taken on a comprehensive set of measures to deal with these latest economic disruptions.
The authorities recognise that in addition to tackling these immediate challenges, long-standing structural issues and vulnerabilities related to climate change will also need to be addressed to accelerate growth, attract private investment, enhance productivity, and build climate resilience, the IMF statement clarified.
IMF-Bangladesh Bank meeting prioritizes unified exchange rate and competitive lending rate
A visiting delegation of the International Monetary Fund (IMF) on Tuesday met with the Bangladesh Bank (BB) Governor and discussed updated financial factors along with the progress of reform in the sectors.
A five-member delegation headed by Rahul Anand, IMF Bangladesh Mission Chief, started meeting with the BB officials in the morning on Tuesday, which ended at 3.0 pm.
Md Mezbaul Haque, executive director, and BB spokesperson told reporters that the IMF team discussed updated information on various economic factors with the several departments of BB including the progress in the use of the IMF's loan.
He also said that the visit was a routine process of the IMF's work and the BB participated in the meeting on behalf of the state.
Sources close to the meeting said among the issues prioritized in the discussion are efforts to unify multiple exchange rates, making lending interest rates market-oriented, and the process of calculating foreign reserves under the IMF definition.
During its (IMF) April 25 to May 2 visit the mission will hold meetings with the officials of the Ministry of Finance's Finance Division, Financial Institutions Division, Economic Relations Division (ERD), Bangladesh Bank, and National Board of Revenue (NBR), sources said.
Bangladesh applied to the IMF for a loan to stabilize the economy amid dwindling forex reserves and agreed to pursue reforms on certain issues.
Read more: Bangladesh receives 1st instalment of IMF’s $4.7 billion loan: BB spokesperson Before and after receiving the first $476.2 million tranche in February, Bangladesh took several steps to reform the structure of its financial sector and its policies, including reducing subsidies by raising the price of power and gas, and fuel.
The foreign exchange crisis in Bangladesh eased after the global lender released the first installment of a $4.7 billion loan. After then, World Bank and Japan International Cooperative Agency
The IMF approved about $3.3 billion for Bangladesh under the Extended Credit Facility ECF) and the Extended Fund Facility (EFF) and about $1.4 billion under the Resilience and Sustainability Facility.
Read more: BB set to announce new monetary policy