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The International Monetary Fund (IMF) has recommended for prioritising government's policy actions in areas of tax administration, macroeconomic management and bank restructuring for successful completion of the fifth Poverty Reduction Growth Facility (PRGF) review.
In its latest Aide-Memoire, the IMF mission said the country's economic growth momentum has been sustained and some progress, made in reducing inflationary pressures.
"However, the distortions caused by the fuel pricing policy have not decreased," it added.
The multilateral donor agency has made an eleven-point recommendation for implementation by the government on a priority basis in keeping with the Memorandum on Economic and Financial Policies (MEFP) finalised early this year for a successful PRGF review. The fourth review was made last November.
On fiscal policy and tax administration, the IMF said some policy changes including raising of taxes on telecommunication services, cigarettes and natural gas will help boost short-term revenue collection, having consistency with longer term revenue objectives.
It recommended for final approval of Value Added Tax (VAT) Large Taxpayers Unit (LTU) organogram, establishment of work programme for the new audit advisor and introduction of uniform taxpayer identification number.
Completion of a study on the revenue cost of tax exemptions by the end of April has also been recommended for considering it as an input to the preparatory work for the forthcoming national budget.
On macroeconomic policies, the IMF suggested further readjustments in fuel price to reduce the losses of Bangladesh Petroleum Corporation (BPC) and also completion of another study on energy pricing policy.
It noted that the longer government waited to make price adjustments, the more difficulties it would face as the losses of the BPC were projected at 0.75 per cent of the country's gross domestic product (GDP).
"These losses are contributing to a number of economic distortions including undermining the financial and capital positions of BPC, Petrobangla and state-owned banks; adversely affecting both the money and foreign exchange markets; promoting smuggling," the Aide-Memoire added.
The IMF suggested a further reduction of the net domestic assets of the Bangladesh Bank of about Tk 2.5 billion to meet the end-March quantitative performance criterion and allowing further increases in interest rates.
It also suggested that limiting strictly government intervention in the foreign exchange market and encouraging a convergence of currency exchange rates to market clearing levels.
On bank restructuring, the IMF suggested determined implementation of timeline for Rupali Bank disinvestment, completing the corporatisation of Agrani, Janata and Sonali banks and taking further steps to strengthen their respective board of directors.
It also wanted to see the banks to take key decisions on operational and restructuring issues without interference from the ministry of finance.
The IMF proposed for holding the next -- and the fifth -- PRGF review in April-May this year.
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