WB emphasises 3 policy reforms; keeps Bangladesh's GDP growth forecast at 5.2%

In order to keep the Bangladesh economy growing, World Bank (WB) has emphasised three policy reforms including - legislation in the board of banks, removing the lending rate cap, and single market determination exchange rate.

Abdoulaye Seck, World Bank country director for Bangladesh and Bhutan, came up with these three policy recommendations when releasing the Bangladesh Development Update April 2023, titled Trade Reform: An Urgent Agenda, at the World Bank Dhaka office on Tuesday (4 March). 

The WB country director said that banking companies need to be aligned with international standards. 

"The Bangladesh government has already finalised the draft amendment which we would like to see so that we can give advice if needed," he said.

Calling for the market to determine the exchange rates to reduce pressure on forex reserves, he said, " If Bangladesh Bank lets the market determine the exchange rates based on demand and supply it will bring more remittance and incentivise exporters."

Abdoulaye Seck also observed that low imports have slowed down the country's investment and growth.

Meanwhile, the World Bank kept the country's GDP growth forecast unchanged at 5.2% in the current fiscal year due to rising inflation and its negative impact on household incomes and firms' input costs, as well as energy shortages, import restrictions, and monetary policy tightening.

The projection is down from 7.2% growth in the previous year. However, the Washington-based lender in January said the economy is expected to pick up again and return towards its potential pace in FY2023/24.

According to the World Bank, Bangladesh was hard hit by spillovers from the changing global environment. The country was priced out of global energy markets and unable to meet the energy needs of households and businesses.

"Dwindling international reserves and rising sovereign spreads increase the risk of more economies falling into crisis. The deficit could have been even larger had it not been for robust growth in demand for Bangladeshi ready-made garments and a growing share of the global market.

"The government responded to high global energy prices with blackouts and factory closures to reduce energy consumption, stopped purchasing vehicles, and made it harder to purchase luxury goods, among other measures to preserve international reserves," it added.