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Govt measures help bring inflation down in Bangladesh, more needs to be done: IMF

Staff Reporter:

The measures undertaken by the government are helping to bring down inflation in Bangladesh, but more needs to be done to reach the goal, the International Monetary Fund (IMF) said on Wednesday.

“Now, what we’ve seen is they (Bangladesh government) have taken measures to tighten the monetary policy to bring inflation down. And inflation is coming down, but further actions needed to ensure that inflation is durably coming down and comes back to target sooner than later,” IMF Asia and Pacific Department (APD) Director Krishna Srinivasan said this during a virtual press conference on the Regional Economic Outlook for Asia and the Pacific held in Tokyo on Wednesday.

Krishna Srinivasan came up with the remarks in response to a question regarding the latest monetary policy taken by the Bangladesh Bank.

Bangladesh has a fund supported programme in the context of back-to-back shocks, said the IMF official.

“Like many other countries, Bangladesh too had to endure shocks, starting from Covid to the Russia’s war in Ukraine and subsequent shocks. In that context, Bangladesh sought access to a Fund supporter program. And as part of that program, there are many pillars, and one pillar, of course, is to bring down inflation. The other pillar is to make sure that you have fiscal sustainability while protecting the poor and the vulnerable. You also had governance reforms, and you had reforms which were aimed at protecting the poor and the vulnerable through our conditionality. Now, what we’ve seen is they have taken measures to tighten the monetary policy to bring inflation down. And inflation is coming down, but further actions needed to ensure that inflation is durably coming down and comes back to target sooner than later,” he said.

Responding to another query on what else can the government have done to pay the arrears instead of issuing bonds worth billions to clear bank debt against arrears at an interest rate of 7.5%, which is further raising the government’s debt, Krishna Srinivasan said, “So there it would be important to see what are the choices you have. The government, as part of the IMF supported programme, is embarking on significant fiscal tightening to ensure that, you know, revenue mobilization remains robust, expenditures are more targeted and so on.

“So fiscal consolidation in that context can have as an offset, but the question is how much more consolidation can it do? And that’s where it’s important. In the context of what we have been talking about is in the context of interest rates being high, that countries have to go beyond what they’ve been doing in terms of fiscal consolidation and further tightening may be needed. Again, this is something which the country team working on Bangladesh will be assessing in the months forward to provide a more definitive answer,” he said.

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