Abstract
The government of the People’s Republic of Bangladesh has requested a three-year Extended Credit Facility (ECF) arrangement with access of 120 percent of quota in support of their reform program. It aims to restore macroeconomic stability, strengthen the external position, and engender higher, more inclusive growth. Under the ECF-supported program, the main components are upfront macro-tightening measures buttressed by greater exchange and interest rate flexibility.
This statement provides additional information that has become available since the issuance of the staff report (March 28, 2012). It does not change the thrust of the staff appraisal.
1. Indicative targets. Preliminary data suggest that indicative targets on net international reserves (floor), net domestic assets of Bangladesh Bank (ceiling), and reserve money (ceiling) under the prospective Extended Credit Facility arrangement were met at end-March 2012. Net international reserves were US$6.405 billion, net domestic assets of Bangladesh Bank were Tk 418 billion, and reserve money was Tk 917 billion. Data on other indicative targets at end-March are currently not available.
2. Recent developments.
Headline inflation declined to 10.1 percent (y/y) in March 2012 from 10.4 percent in February 2012, with lower food price inflation the main cause.
Weighted-average bulk and retail electricity tariffs were raised on March 29, 2012 by 7½ and 6¼ percent, respectively, retroactively from March 1. These hikes follow tariff increases effected in November 2011 and February 2012 (see footnote 2 in the staff report) and are consistent with restricting on-budget subsidy-related losses of the Bangladesh Power Development Board to agreed levels in FY12 (July 2011–June 2012).
Budget performance in January 2012 was in line with the programmed fiscal outlook for FY12. Preliminary data on National Board of Revenue collections in February 2012 were also consistent with this outlook.
Workers’ remittances were US$1.1 billion in March 2012 and US$9.5 billion so far in FY12, in line with balance of payments projections.