Bangladesh told to reinforce infrastructure

12 Jun 18

Bangladesh must boost investment to ease infrastructure bottlenecks if it is to maintain progress towards becoming a middle-income economy, the IMF has said.

Fund officials believe that while the South Asian country continues to register strong growth – projected to be about 7% in 2018 – it must continue investing in infrastructure and banking to maintain momentum.

Daisaku Kihara, IMF mission chief for Bangladesh, said tax revenues are currently low at 9% of GDP – the average for low-income countries is about 15% – and called for more investment in infrastructure and social spending.

Kihara said: “Tax policy reform should also be supported by continued efforts to strengthen tax administration and improve tax compliance with online registration and filing of tax returns.”

Despite the scale of the ongoing Rohingya refugee emergency, by which Bangladesh has welcomed nearly 700,000 refugees from Myanmar, the economic and budgetary impact of the crisis has been limited.

This has partly been as a result to the international financial support, Kihara said.

“However, spending pressures could increase in the future and important challenges remain, including reducing the risk of flooding and landslides in the refugee camps as the monsoon approaches, maintaining cooperative relations with the host communities, and providing key social services and infrastructure,” he added.

Banks remain a main source of financing for companies in the country, the IMF said.

The government should also support the sector by strengthening banks’ internal controls and governance and putting in place a more effective legal system.

Regulators should also enforce existing regulatory standards more resolutely and deal with banks that fail to observe the standards.

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