IMF recommends compact budget for Bangladesh

Media reports maintained this adding an IMF delegation visited Dhaka to assess Bangladesh’s compliance with the conditions attached to the loan granted by the IMF.

During their meeting with the finance department, the IMF delegation presented their suggestions.

Led by finance secretary Md Khairuzzaman Mozumder, the Bangladesh delegation engaged in discussions with Chris Papageorgiou, who heads the development macroeconomics division in the IMF’s research department.

Apart from the meeting with the finance department, the IMF delegation also held discussions with the Bangladesh Bank, the central bank of the country.

IMF’s loan conditions, set during the approval of a $4.7 billion loan on January 30, 2023, include directives on enhancing revenue and reforming the banking sector.

Bangladesh has already received over $1 billion in two instalments, with the third instalment expected by the end of the previous month.

Meanwhile, reports suggest Bangladesh had already planned to restrain the budget’s growth even before receiving IMF’s recommendations.

Traditionally, the budget sees a 12 to 13 per cent increase annually, but this year’s growth is expected to be less than 5 per cent.

IMF stressed the importance of reducing the budget deficit, which, including grants, stood at 5.2 per cent of GDP in the current fiscal year. The IMF advised keeping this deficit below 4.6 per cent by year-end.

Revenue collection remains a concern though, with the NBR falling short of its targets.

Despite a 15 per cent increase in revenue collection from July to March compared to the previous fiscal year, it still fell short of the set target.

The IMF has also set conditions for increasing the tax-to-GDP ratio by 0.5 per cent annually even if the finance department reportedly assured IMF of its commitment to achieving this target.

Former IMF official Ahsan H Mansur echoed IMF’s sentiments, emphasising the need for budget reduction and increased revenue collection even as he highlighted the importance of reducing reliance on loans, likening the situation to using loans for basic necessities, which is not sustainable eventually.

Fibre2Fashion News Desk (DR)