Bangladesh’s economic growth is expected to pick up to 6.6 per cent in FY22 as the impact of COVID-19 abates and policies remain accommodative, as per a new report by International Monetary Fund (IMF). The country needs to address vulnerabilities and prioritise creating greater fiscal space, reducing fiscal risks, preserving the stability of the financial system and modernising policy frameworks.

An IMF staff team, led by Rahul Anand, visited Dhaka from December 5-19 to hold discussions on the 2021 Article IV Consultation with Bangladesh. At the conclusion of the visit, Anand said: “Despite being hit by multiple waves of the COVID-19 pandemic, quick and decisive actions by the authorities, supported by the external environment, led to a much quicker rebound than Bangladesh’s regional peers.”

The fiscal deficit is projected to reach 6.1 per cent of GDP in FY22 as the pandemic-related spending increases. With the projected pick up in the imports of capital goods, industrial raw materials and commodities, the current account deficit is expected to widen in FY22.

Bangladesh’s economic growth is expected to reach 6.6 per cent in FY22 as the impact of COVID-19 abates and policies remain accommodative, as per a new report. The country needs to address vulnerabilities and prioritise creating greater fiscal space, reducing fiscal risks, preserving the stability of the financial system and modernising policy frameworks.

Public debt will remain sustainable over the long-term. As the external environment improves and the domestic vaccination programme progresses, growth is projected to increase to 7.1 per cent in FY23. The uncertainty around the outlook remains high and risks are tilted to the downside.

To maintain competitiveness in a post-pandemic world, structural policies should focus on accelerating growth, attracting private investment, and enhancing productivity to lift growth potential. Building climate resilience remains critical, as per the IMF report.

Anand added: “Increasing revenue and enhancing fiscal policy frameworks are necessary to scale up inclusive and productivity enhancing investments, while safeguarding fiscal sustainability. With the economy rebounding, the central bank should closely monitor inflationary pressures and stand ready to normalise. Caps on the lending and borrowing rates limit the policy space and should be phased out to strengthen market-based pricing, improve credit allocation and monetary transmission. Greater exchange rate flexibility, together with safeguarding foreign exchange reserves, will help buffer external shocks.

“More decisive reforms are needed to facilitate Bangladesh’s transition out of the LDC status and to maintain competitiveness in a post-pandemic world. To support private sector-led growth, underpinned by exports and investments, structural reforms should focus on improving governance, diversifying exports, increasing productivity, and building climate resilience to lift growth potential.”

Fibre2Fashion News Desk (KD)