Dhaka, Bangladesh (BBN) – International Monetary Fund (IMF) in its latest assessment of the Bangladesh economy said economic activity revived with the return of normalcy after the elections of January 2014.
Referring to the country’s economic growth in the outgoing year, it said, “As per preliminary estimates, growth in Fiscal Year (FY) 2014 was 6.1 per cent”.
Assessing the country’s future economic potential the Fund said “Growth is expected to pick up in FY 2015, as domestic demand strengthens, worker remittances go up and public investment increases”.
The IMF made these observations in its country assessment report prepared for its recently held meeting at its headquarters in Washington D.C.
Its observation about inflation is “Inflation eased to 7.0 per cent in FY 2014 as non-food prices lowered. It is expected to ease further in FY 2015. Though import growth will be higher and export growth is likely to moderate.”
Regarding foreign currency reserves the Fund was upbeat “International reserves are likely to continue building up”.
So was its observation about local resource mobilization; “During FY 2014, tax revenue was adversely impacted by slower economic activity. However, the government kept current expenditure under control and the fiscal deficit for FY 2014 was contained at 4.2 per cent of GDP, narrowly missing the targeted figure”.
Its projection for the next fiscal year is “The fiscal policy stance in FY 2015 will be prudent and the overall fiscal deficit (excluding grants) is targeted at 3.8 per cent of GDP”.
Referring to investment it said “Public investment, especially in the critical transport and power infrastructure, and social sector spending will receive priority.”
As for monetary policy it said “The monetary stance is focused on bringing average inflation down to 6.5 per cent by the end of FY 2015. There are upside risks to inflation from strong growth in demand and reserve money will be tightened as and when necessary to keep inflation in check”.
Praising measures taken by the government it said “The government has undertaken a number of reform measures across a range of areas including tax legislation and administration, subsidy policies, financial management of State Owned Enterprises (SOEs), public debt and cash flow management, central bank financial reporting, and banking sector supervision”.
Apparently there is a proposal for a new VAT and the IMF says “There have been, however, delays in the implementation of a new VAT, a critical element of tax reforms, which was expected to be launched in July 2015. The government remains committed to this reform and is putting in place a new time table for the same”.
As for poverty reduction, labor standards and social safety net, the IMF said “Poverty reduction remains on track with the target of reducing poverty from 31.5 per cent in FY 2010 to 22.5 per cent in FY 2015. Significant progress has been made in improving labor rights and factory standards. In fact, this is a reason why export growth is expected to moderate slightly, as the readymade garment industry adjusts to higher labor and safety standards. Social safety nets for the poor continue receiving special attention of the government”.
BBN/SSR/AD-17Oct14-11:58 pm (BST)
