IMF to team up with WB to 'turn the corner'

After setting an "ambitious" but "achievable" revenue mobilisation target for Bangladesh, the International Monetary Fund (IMF) on Sunday said it would jointly work with the World Bank to assist the South Asian nation in achieving the target.

Chris Papageorgiou, IMF mission chief for Bangladesh, at a virtual press briefing said the low revenue income is really an issue for Bangladesh that goes back decades and the two lending agencies "will try to turn the corner there" though that is challenging.

"This is starting now. We are in discussions with the authorities. It is the joint revenue mobilisation initiative, which basically has the two institutions joining forces, coordinating on four primary pillars on how to get the revenue mobilisation going," he said.

The joint programme includes policy measures and structural measures like the separation of policy and administration of the National Board of Revenue (NBR), he said.

Under the $4.7 billion credit programme, the IMF set a Tk 2.4 trillion revenue mobilisation target for December 2025, which the economists find in no way achievable.

Regarding the large revenue target, Mr Papageorgiou said the IMF has had targets since the beginning of the programme. "And if you look at the performance, it has not been very encouraging. The authorities are making efforts. Some of these efforts come short."

"Now, what we have in mind is always something that is ambitious in terms of a target, but always achievable. We are in a critical juncture right now, which I think is very important because there are many elements in this economy that are challenging," he added.

He pointed out some challenges ahead. "There is the transition to the elections. There are uncertainties, including geopolitical, economic, domestic, and external. But this is where we think that there can be a point of inflection."

On the inflow of foreign direct investment, referring to the IMF's staff report, he said the timing of elections is related to investment sensitivity, and when the uncertainty about elections and the timing remains, investment will see a pause, especially from outside the country.

"With firming the timeline of elections, we expect now that that uncertainty goes away…we believe that the investment will start coming in," he said.

Regarding the new exchange rate regime, Mr Papageorgiou pointed out that it is a crawling peg and attached to the band, and it is a transitional reform.

"It is not a full flex; it is one that aims to get the reform as such because we recognise that Bangladesh is at a stage in its development that can benefit from a transitional regime," he said.

He also said the design of this crawling peg with the band aims to allow for the flexibility that is needed right now, but with the aim to get to the full flex in the future and as Bangladesh develops and becomes more and more mature.

Mr Papageorgiou said the IMF is in the process of discussions with the authorities that there is a need to take steps to strengthen the crawling peg before going to full flexibility of exchange rate in the future.

On inflation, he said the IMF is not satisfied with the high rate of inflation. Thus, it welcomed the authorities' tight monetary policy, which aims to bring inflation even further down to its target range of 5.0 to 6.0 per cent.

Regarding energy subsidy, he said high energy subsidy creates massive inefficiency and the IMF is working with the authorities to help reduce these subsidies.

"The issue is very large not only because it provides pressure to the macro-economy but also to the fiscal, where yearly it is estimated to be about 1.0 per cent of GDP," he noted.

Mr Papageorgiou said the banking sector has been in distress, which amplified after the events of December 2024, and to the point where some of the banks are clearly under-capitalised, with the central bank providing liquidity.

"But as we have been signalling now for some time, this cannot be a viable and long-term solution," he noted.

Ivo Krznar, IMF deputy mission chief for Bangladesh, also spoke at the event attended by Jayendu De, IMF resident representative in Bangladesh, and moderated by Randa Elnagar, senior media officer at the IMF.

syful-islam@outlook.com