This will help finance the health, social protection and macroeconomic stabilisation measures, meet the urgent balance-of-payments and fiscal needs arising from the COVID-19 outbreak, and catalyse additional support from the international community, IMF said in a statement on its website.
The COVID-19 pandemic is severely impacting the Bangladeshi economy. Two major sources of external financing — exports of garment and remittance inflows — are projected to decline rapidly. Necessary policy responses to prevent a domestic pandemic, including the shutdown of major cities, will inevitably affect economic activities and slow growth, according to the statement.
“The authorities have responded quickly to the COVID-19 outbreak with a comprehensive set of measures aimed at containing the spread of the pandemic, providing immediate relief to the most vulnerable households and affected businesses, and preserving the country’s macroeconomic prospects. A temporary increase in the fiscal deficit is necessary, and it will be important to ensure transparency and accountability in the use of all emergency spending,” Antoinette Sayeh, deputy managing director of IMF, said in the statement.
“In addition to increasing health expenditures, the government’s immediate response has focused on expanding food distribution and cash transfer programs to vulnerable populations, ensuring the payment of wages in export-oriented industries, and facilitating the provision of working capital to businesses and farmers,” IMF said.
“The Bangladesh Bank took appropriate steps to ease liquidity conditions and allow the financial sector to support the economy. Further easing could be considered if the economic situation deteriorates and inflation remains moderate. A gradual increase in exchange rate flexibility should be allowed to adjust to the external shock while preserving foreign reserves,” IMF said.
“Once the crisis abates, the authorities are committed to re-focus on addressing banking sector problems, including nonperforming loans and the poor performance of the state-owned commercial banks. They are also committed to ensuring fiscal discipline and debt sustainability by broadening the tax base and strengthening tax administration and compliance.”