IMF's blueprint for Bangladesh's upper middle income goal
The International Monetary Fund (IMF) has identified two critical factors to Bangladesh's goal of middle upper income status by 2031: infrastructure and substantial investment in human capital.
While work is underway on both ends, there are a number of other factors to take into consideration.
It may not be smooth sailing, especially amid the recent onslaught of unforeseeable variables such as the Covid-19 pandemic and the Russia-Ukraine war, but preparedness will prove to be the key.
The IMF, on its part, has given the blueprint for Bangladesh's road ahead.
The authorities recognize these challenges and also the need to tackle climate change issues, which expose the economy to large risks that could threaten macroeconomic stability.
It has called for implementation of the domestic revenue mobilisation strategy that relies on both tax policy and revenue administration reforms to allow increasing social, development and climate spending sustainably.
Bangladesh also needs to focus on fiscal reforms to strengthen the management of public finance, investment, and debt to improve spending efficiency, governance, and transparency.
Another important area is reducing financial sector vulnerabilities, alongside strengthening oversight, enhancing governance and the regulatory framework, and developing capital markets to help mobilise financing to support growth objectives.
Structural reforms are also needed to create a conducive environment to expand trade and foreign direct investment, deepen the financial sector, develop human capital, and improve governance to enhance the business climate.
Work is already underway to meet these goals.
Bangladesh's tax-to-GDP ratio -- at around 9 percent of GDP -- is one of the lowest in the world, but the National Board of Revenue is looking to change that.
Elaborating on ways to expand the tax net, the NBR in July committed to work towards changing the types of tax surveys, and ensuring tax compliance and tax return submissions of entities with tax identification numbers (TINs).
The revenue authorities will also give effort to bringing homeowners in Dhaka under the tax net and identifying taxpayers at the upazila level, he added.
On the financial side, things still look bleak. The Bangladesh Bank has hardly taken any visible steps to reduce loan defaults. This is more glaringly evident at a time when major banks are falling prey to corruption, yet those manufacturing the duplicity are yet to be found.
The Bangladesh Bank has also shied away from a floating exchange rate, creating multiple exchange rates and increasing pressure on the foreign reserves to meet dollar demand.
The lending cap rate it has instituted is also said to be bleeding some banks dry and benefitting a small group.
On a positive note, work is underway to create a more skilled workforce, using the benefits of technology. But a lot more work has to be done towards this end as well.
The first step now could be building on Bangladesh's numerous successes. The country has a strong track record of growth and development, even in times of elevated global uncertainty.
This development during uncertainty is exemplified by the country's Gross Domestic Product (GDP) growth during and after the outbreak of Covid-19, which brought the economic wheels of the world to a grinding halt.
Post-pandemic GDP growth was an impressive 7.88%, according to data from the Bangladesh Bureau of Statistics. When the pandemic struck, this then fell to a worrying 3.45%.
Signs of a lift were far and few, but then came the Fiscal Year 202-21, when the growth bounced back to 6.94%. By 2021-22, GDP growth climbed to 7.25%.
It was robustness and resilience personified.
With this out the way, the other successes have been the vigorous demographic dividend, the strong ready-made garments sector, resilient remittance inflows, and stable macroeconomic conditions.
While the hike of commodity prices and rampant inflation has been a blot, Bangladesh's story of poverty reduction is impressive nonetheless.
Bangladesh reached lower-middle income status in 2015, climbing out of the status of being one of the poorest nations in the world.
It will graduate from the UN's Least Developed Country list by 2026.
According to the World Bank, to achieve that vision by 2031, "Bangladesh needs to create jobs and employment opportunities through a competitive business environment, increase human capital and build a skilled labour force, build efficient infrastructure, and establish a policy environment that attracts private investment."
The World Bank has also identified the need to diversify exports beyond the RMG sector and to make urbanisation more sustainable.
Other areas Bangladesh needs to look at are strengthening public institutions, including fiscal reforms to generate more domestic revenue for development.
"Addressing infrastructure gaps would accelerate growth. Addressing vulnerability to climate change and natural disasters will help Bangladesh to continue to build resilience to future shocks. Pivoting towards green growth would support the sustainability of development outcomes for the next generation," the World Bank has said.
Bangladesh is on track to tick-off most of the things on that list. For instance, the country is the global leader in having the highest number of green garment buildings, where 60 are platinum rated, 110 gold rated, 10 silver, and four have no rating. Dozens more units are in the process of achieving LEED certification.
The mega development projects such as the metro rai and the Padma Bridge also speaks to the government's commitment to filling infrastructural gaps.
This, however, isn't the time to rest on laurels. The journey ahead is still a long one.