[{"bbox": [97, 153, 1134, 260], "category": "Text", "text": "Guided by the IMF, The Bangladesh Bank took the bold action in May to realign the exchange rate and simultaneously adopted a crawling peg regime with a band as a transitional step toward greater exchange rate flexibility, also to restore external resilience. Monetary policy was tightened; the current monetary policy rate is 8.5%. Moreover, the lending rate, which was previously capped, is now market-based."}, {"bbox": [97, 285, 1134, 471], "category": "Text", "text": "The target on tax revenue that was missed end June 2023 (last quarter of FY23), was met in December 2023 (first quarter FY24). Hence, this criterion was met in the second Review. Expectations are now however that the next floor on tax revenue collection will again be missed (end of FY24). There is thus a huge pressure on the National Board of Revenue. In several seminar, that Research Institutes recently organised, the Chairman of NBR presented – unlike in previous year. NBR is working on reducing some of the tax exemptions and is seeking other ways of collecting more taxes. It is aware that in particular income tax collection will have to rise, since unlike in developed countries, the share of income taxation is superseded by customs and VAT."}, {"bbox": [97, 497, 1134, 605], "category": "Text", "text": "Financial reforms should focus on addressing vulnerabilities in the financial sector, by strengthening banking regulation, supervision, and governance. Non-Performing Loans (NPLs) are still burdening the banking sector, in particular the state banks. The Bangladesh Bank is working with the commercial banks on the development of a roadmap under the non-performing loan reduction strategy and is promoting bank mergers."}, {"bbox": [97, 630, 1134, 738], "category": "Text", "text": "Deepening capital markets will help mobilise financing to support growth objectives. Further trade liberalisation and enhancements to the investment climate will help bolster export diversification and foreign direct investment. Raising productivity, including through strengthening quality and accessibility to education and upskilling, along with increasing female labour participation, is pivotal to boost growth potential."}, {"bbox": [97, 763, 1134, 840], "category": "Text", "text": "Building resilience to climate change and natural disasters is a priority for achieving high, inclusive, and green growth. In this context, strengthening institutions, improving climate spending efficiency, and mobilising climate finance remain crucial."}, {"bbox": [97, 868, 1134, 949], "category": "Text", "text": "According to the most recent Debt Sustainability Assessment (December 2023), Bangladesh remains at a low risk of debt distress, despite the growing amount of external loans. The projection for the total debt-to-GDP ratio for FY24 is 41.4% and the external public and publicly guaranteed debt to GDP remain sustainable at around 18.1%."}, {"bbox": [97, 974, 1134, 1134], "category": "Text", "text": "According to the EU Delegation, domestic revenue mobilisation remains the main priority. In particular, there is ample room for more direct tax collection, which would also be conducive to reduce the increasing income inequality. The EU is supportive here, since it already works with the National Board of Revenue i.e. the national tax office on the digitalisation of eReturns and contributed to income tax litigation and tax arrears and recently on transfer pricing. Further digitalisation should positively impact compliance and be conducive in the fight against fraud and corruption, and in the course of time increase tax collection."}, {"bbox": [97, 1160, 1134, 1211], "category": "Text", "text": "**In conclusion, the authorities are pursuing a stability-oriented macroeconomic policy, and the eligibility criterion is met.**"}, {"bbox": [85, 1253, 437, 1282], "category": "Section-header", "text": "### 2.3.3 Public Financial Management"}, {"bbox": [97, 1295, 1134, 1508], "category": "Text", "text": "The latest PEFA 2021 assessment for Bangladesh was launched in October 2021 and finalized in June 2023 and from December 2023 is publicly available at FD, MOF's website. The final report shows that overall, the situation has improved slightly in comparison with the previous PEFA 2016. By pillars, improvements can be seen for Pillar II (Transparency of Public finances), Pillar IV (Policy-based fiscal strategy and reporting) and Pillar VI (Accounting and reporting). By dimensions, the scores improved for 23 dimensions, decreased for 7 dimensions, and remained unchanged for 58 dimensions. 6 dimensions were not comparable. By indicators, the scores improved for 12 indicators, decreased for 4 indicators, and remained unchanged for 12 indicators. 3 indicators were not comparable."}, {"bbox": [97, 1508, 644, 1534], "category": "Text", "text": "The key weaknesses identified in the PEFA assessment are:"}, {"bbox": [135, 1562, 1134, 1617], "category": "List-item", "text": "* **Pillar 1- Budget Reliability:** Budget execution deviated significantly from the initial budget, the overall expenditure outcome deviated by more than 5 percent and revenue outturn by 15 percent."}, {"bbox": [1028, 1681, 1144, 1706], "category": "Page-footer", "text": "Page 10 of 32"}]