The Financial Express

IMF for market-based pricing of savings tools

| Updated: March 11, 2018 10:41:47

Internet photo used for illustrative purpose. Internet photo used for illustrative purpose.

The visiting International Monetary Fund (IMF) mission suggested tighter eligibility criteria and move towards market-based pricing to reduce reliance on national savings certificates, help strengthen financial intermediation and expand the capital market.

IMF team leader Daisaku Kihara made the observations on Thursday while delivering speech in a press conference after concluding its two-week visit in Bangladesh.

The IMF team visited Dhaka from February 25 to March 08 to hold discussions on the 2018 Article IV consultation with Bangladesh.

The team also focused on strengthening banking regulations through effective supervision to combat ongoing challenges in the banking system, including higher non-performing loans.

"It will require enhancing banking sector regulation and supervision, particularly for the state-owned commercial banks, avoiding regulatory forbearance, improving corporate governance, and implementing judicial reforms to expedite loan recovery," said the IMF team leader.

He also suggested judicial reforms for faster default loan recovery.

Mr Daisaku Kihara said priority should be given to broadening tax base, implementing delayed VAT reform, and revising direct taxes.

"Further improvements in tax administration will boost revenue earning as well as reduce compliance cost and enhance transparency."

Mr Kihara further said Rohingya refugee crisis could cause spending pressure, and continued financial support from the donors will be essential in this regard.

According to his statement, "Efforts to harness the country's growth potential while ensuring economic and financial stability will require creating fiscal space for infrastructure investments and social safety nets, making the financial sector more efficient, enhancing the business environment, and strengthening governance."

"Against this backdrop, IMF staff and the authorities held fruitful discussions on policy measures to preserve macro-economic stability and secure strong and inclusive growth over the medium term."

"Continued efforts to increase revenue collection are necessary to provide the much-needed fiscal space for boosting public investment and social spending. Public investment in infrastructure is especially important to improve the business environment, attract FDI, and diversify exports," the statement added.

The IMF team leader noted that mobilising long-term capital for growth would depend on policies to make the financial sector more efficient.

The IMF team, during its visit, met the finance minister, the Bangladesh Bank governor, the finance secretary, the National Board of Revenue (NBR) chairman, and other senior officials as well as representatives of the business and banking sectors, labour unions, think-tanks and development partners.

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