Govt pledges transparency, addressing banking sector ills to IMF
Bangladesh has pledged to utilize the emergency the help of the International Monetary Fund transparently and effectively, ensure fiscal discipline and prioritising addressing banking sector problems since it secured $732 million from the crisis lender to tackle the coronavirus pandemic.
The finance ministry and the BB are finalising a letter of intent on the respective roles and tasks for servicing financial obligations to the IMF, they said.
"We are focused on making certain crisis resources are being used transparently and effectively," said Finance Minister AHM Mustafa Kamal and Bangladesh Bank Governor Fazle Kabir in a joint letter to the Washington-based multilateral lender.
Toward that end, the federal government would ensure that people for coronavirus-related contracts provide their beneficial ownership information to the government and that information is appropriately recorded and distributed around audit authorities.
The federal government will publish online an audit of COVID-19-related expenditure and other government subsidised programmes by any office of the Comptroller and Auditor General within 12 months and crisis-related public procurement contracts and related documents.
"We will seek to adopt reforms to permit publication of beneficial ownership information of companies awarded public procurement contracts when feasible," said the letter dated May 20.
On May 29, the executive board of the IMF approved a disbursement of $244 million under the Rapid Credit Facility and a purchase of $488 million beneath the Rapid Financing Instrument.
This will help finance medical, social protection and macroeconomic stabilisation measures, meet up with the urgent balance of payments and fiscal needs due to the coronavirus outbreak and catalyse additional support from the international community, the lending company said.
The IMF hasn't attached any conditions for the loan enjoy it did while extending assistance in the past and has not called for belt-tightening because spending is required to stop persons dying or from falling right into a permanent trap of unemployment.
Besides, countries everywhere, including Bangladesh, are facing a shortage of forex, not because they have indulged in virtually any irresponsible spending sprees, but because of a virus beyond their control.
But the Washington-based fund urged governments to watch what these were spending and to be sure that multitrillion-dollar spending commitments did not cause permanent damage.
"Spend everything you can but keep the receipts," Kristalina Georgieva, the fund's managing director, said in a clear warning to countries that there was a risk a chunk of the $8 trillion already committed would vanish consequently of corruption.
"We don't want accountability and transparency to take a back seat," she said.
To mitigate the effect on the economy and the population, a number of fiscal, monetary and regulatory measures have already been set up in Bangladesh, the finance minister and the BB governor said in the letter.
"Following emergency response to the crisis and stabilisation of the economy, we plan to re-focus on addressing banking sector problems, including non-performing loans and poor performance of state-owned commercial banks."
Prior to the outbreak of the rogue virus, the federal government started amending several laws to enforce more banking sector discipline.
"Looking ahead, we are focused on addressing the issues as a matter of priority by ensuring effective banking sector supervision, strengthening corporate governance of commercial banks and improving the financial performance of state-owned commercial banks."
The government has focused on bringing the fiscal deficit slowly but surely back to 5 % of gross domestic product (GDP) following a temporary widening therefore of the pandemic while ensuring smooth recovery of the economy.
"We recognise that restoring fiscal discipline and debt sustainability while allowing the government to provide the required public services and investment, will require an improvement in revenue performance."
With the ongoing technical assistance from the IMF, the federal government is determined to strengthening tax administration and compliance, reducing tax exemptions and broadening the tax base, the letter said.
The IMF assistance can help meet the urgent forex needs stemming from the disruptions to remittance and garment exports and mitigate the near-term strain on the balance of payments and the budget.
Bangladesh has announced some stimulus packages, including subsidised loans by banks, aggregating about Tk 103,000 crore, which is 3.7 per cent of GDP.
It issued a revised cover fiscal 2019-20 towards the end of March which includes additional resources to invest in the COVID-19 Preparedness and Response Plan and also to augment existing transfer programmes that benefit the indegent.
Retail cash transfers to households will be channelled through bank accounts and mobile payments to ensure effective targeting and plug in leakages, said Surjit Bhalla, executive director for Bangladesh at the IMF and Bhupal Singh, an adviser to the executive director, in a statement to the IMF.
The economy is likely to record a sharp V-shaped recovery with supply chains resuming.
Given the moderate degree of the pre-pandemic fiscal deficit, general government debt, current account deficit and well-anchored inflation, the economy is located favourably to get traction once external risks subside, the statement said.
