The country’s economy is set to continue expanding this year with growth projected to be over 7% and inflation close to the central bank’s target, it says.
However, the Washington-based Fund has added that important policy challenges remain and authorities should make increasing tax revenues a priority.
“Economic growth in Bangladesh continues to be strong,” said Daisaku Kihara, who headed a team of IMF economists to Dhaka for their latest “Article IV” consultation to take stock of the economy.
“Robust private consumption pushed real GDP growth close to 8% in FY2018, while inflation increased slightly, due mainly to higher food prices.
“Export growth has picked up recently, based on solid performance of the ready-made garments sector. Remittances inflows have also strengthened.”
Kihara said monetary policy in Bangladesh should be geared toward containing risks to the inflation outlook stemming from higher global oil prices, rapid economic growth, and elevated inflation expectations.
Fiscal policies should aim to strengthen efforts to mobilize revenues through tax collection while containing spending pressures through higher subsidies.
The IMF believes Bangladesh continues to face important challenges in its efforts to reach upper middle-income status, and reforms that should be prioritised include efforts to reduce vulnerabilities in the banking sector.
“The financial situation in the banking sector continues to deteriorate despite strong growth,” added Kihara.
“Resolutely addressing the high level of non-performing loans in the banking sector is essential to address financial stability risks and associated fiscal risks.”
The IMF is also recommending that greater efforts should be made to diversify the economy.
“Bangladesh has succeeded in fostering a dynamic and fast-growing economy with significant poverty reduction,” said Kihara.
“To preserve and build on that achievement, diversification into more complex products would spur integration into global value chains and make exports more robust to changes in global demand patterns.”
