RESTRICTED  WORLD TRADE  
ORGANIZATION  WT/BOP/R/86 
14 May 2007 
 (07-1987) 
Committee on Balance-of-Payments Restrictions  
  
 
 
REPORT ON THE CONSULTATIONS WITH BANGLADESH 
 
 1. The Committee on Balance-of-Payments Restric tions met on 3 May 2007 to consult with 
Bangladesh under Article XVIII:B.  The consulta tions were held under the Chairmanship of 
Ambassador Chitsaka Chipaziwa (Zimbabwe) in acco rdance with the Committee's terms of reference, 
and pursuant to Article XVIII:12(b) of GATT 1994 and the Understanding on Balance-of-Payments 
Provisions of GATT 1994.  The IMF was invited to pa rticipate in the consultations in accordance with 
Article XV:2 of GATT 1994. 
2. The Committee had before it the following documents: 
 WT/BOP/S/14 Consultations with Bangladesh – Background Document by the Secretariat  WT/BOP/G/14 Basic Document by the Government of Bangladesh  WT/BOP/R/76 Report on the Consultations with Bangladesh (2004)  WT/BOP/N/63 Notification Under Paragraph 9 of the Understanding on the Balance-of-
Payments Provisions of the Genera l Agreement on Tariffs and Trade – 
Communication from Bangladesh  
 WT/BOP/N/64  Notification Under Paragra ph 9 of the Understanding on the Balance-of-
Payments Provisions of the Genera l Agreement on Tariffs and Trade – 
Communication from Bangladesh 
A. O
PENING STATEMENT FROM THE REPRESENTATIVE OF BANGLADESH  
3. The statement by the representative of Bangladesh  is attached as Annex 1.   
B. STATEMENT FROM THE REPRESENTATIVE OF THE IMF 
4. The statement from the representative of the IMF  is attached as Annex II. 
C. DISCUSSION IN THE COMMITTEE  
5. Only one Member spoke.  She thanked Bangladesh  for its recent notification and was pleased 
to note the near-doubling of exports from Bangladesh since 2001 and the strengthening of its external 
position.  The growing contribution of internati onal trade to GDP – from 28 % to 38 % between 2000 
and 2006 – and progress in reducing rural poverty were equally noteworthy.  She appreciated the 
effort made by Bangladesh to dismantle its restri ctions and looked forward to continued progress in 
this direction. WT/BOP/R/76 
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D. C
ONCLUSIONS OF THE COMMITTEE  
6. The Committee concluded that Bangladesh had met its obligations and looked forward to the 
removal of the remaining restrictions.   WT/BOP/R/76 
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ANNEX I 
 
Statement from Bangladesh  
  
7. It is a pleasure to participate in the m eeting of the Committee on Balance-of-Payments 
Restrictions, under your wise and able guidance.  I hope you, and the Members present, will excuse 
me if I am unable to stay throughout the meeting.  On 20 April, at the Informal TNC, Members noted 
the commitment of a number of major players to conc luding the Round by the end of this year.  If that 
is our objective, there is an urgent need now for ser ious substantive engagement  by all partners in the 
multilateral process.  As a Chair of a negotiating gro up, I have to provide a forum for the Members to 
negotiate in the areas covered by our negotiating group.   I have suspended the meeting, which I chair, 
to come to your Committee and to ma ke this statement.  Thereafter, I will need to return to that 
meeting.  I seek your indulgence, but my colleagues w ill be here through the rest of the BOP meeting.   
8. The Government of Bangladesh deeply appreci ates the interest of this Committee in one 
element of a subject of utmost importance to us:  our foreign trade regime.  The Members are aware 
of the background to the negotiations that led to our  retaining the ban on the import of four categories 
of products.  It was always our intention to rem ove the restrictions as early as possible, given our 
domestic circumstances.  To this end, we are happy to engage in the exercise of announcing our 
timetable for lifting of this ban.   
9. We have submitted a document that outlines the f actual position of our foreign trade, and the 
context of the current discussions.  I will pick out  some elements from that and review the macro 
situation, and then talk about th e specifics of the import ban and our programmes for lifting them.   
10. Many will perceive the macro indicators fo r the Bangladesh economy to be generally 
favourable.  We have had reasonabl y good GDP growth of over six per cent for the last few years.  
This has resulted in higher per capita incomes and, most importantly, a reduction of the proportion of 
people living under the poverty line.  Perhaps what is most remarkable is the entrepreneurship in the 
private sector, not only among investors but also in ot her walks of society such as in social sectors.  
These are good signs.   
11. Complacency is what the people of Bangladesh cannot afford, as one of the most 
underdeveloped Members of the WTO.  We have our  own share of political problems, which we are 
trying to overcome.  We have the dubious distinctio n of living in the most densely populated country 
of the world.  Although our population growth rat es have plummeted to just over one and half per 
cent, but the additions to our labour force each year is staggering.  Then, there is our vulnerability to 
the environmental and ecological factors.  Alt hough our agriculture now contributes barely twenty-
one per cent to the GDP, the rural areas provide employme nt to over fifty per cent of our labour force.  
Any change in agricultural output has immense repercussions to employment, and the human 
dimension of that can easily be appreciated.  Governmental intervention becomes a necessity, on 
occasions.   
12. Bangladesh has been trying very hard to partic ipate in the process of globalization, and to 
benefit from the opportunities that it offers.  We have  managed to increase our exports at a fairly rapid 
pace.  But this also means that our imports have  to go up, as many of the exports require imported 
intermediate inputs.  Our exports are a very narro w basket, not diversified.  The current scenario 
would not have been sustainable, without the ra pid increase of inward remittances from our workers 
abroad.  On the whole, each year, our vulnerability to  external shocks increases, as the ratio of trade to 
GDP increases.  It is currently at over fo rty per cent, which is exceedingly high.   
13. We do not have the luxury, unlike many other countries, of being able to cushion the 
domestic economy or specific sectors from unfavourable ex ternal shocks.  It is clear that policy space WT/BOP/R/76 
Page 4  
 
for the government is essential, to move the economy  or specific sectors, or to protect specific 
domestic activity.  This is the opportunity the WT O provided, through the import restrictions on the 
four categories of products.   
14. The membership is aware that we have alread y removed, in July 2005, well ahead of the 
deadline, the restrictions on the import of cartons.  The articles that remain are salt, and chicks and 
eggs.  We are committed to the removal of all rest rictions on salt by the end of 2008, and on chicks 
and eggs by 31 December 2008.  At that stage, we will have removed all rest rictions, in accordance 
with our commitment to BOP Committee. 
15. I thank you.  WT/BOP/R/76 
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ANNEX II 
 
IMF Staff Statement for the WTO  
Balance of Payments Consultation with Bangladesh  
 
 
Background 
1.      Bangladesh has made significant strides in  implementing its reform strategy aimed at 
higher growth and faster poverty reduction .  This strategy is being supported by a Fund 
arrangement under the Poverty Reduction and Gr owth Facility (PRGF) since June 2003, as 
augmented under the Trade Integration Mechanism in July 2004 to bring the total amount of funds 
available to SDR 400 million.  Following two six mont h extensions, the arrangement is due to expire 
in June 2007, with SDR 84 million remaining as pote ntially available for the sixth and final review.  
The authorities' reform strategy is also articulated  in a Poverty Reduction Strategy (PRS) published in 
November 2005.  
2.      Broad-based growth has been sustained in recent years.  Economic growth has averaged 
6.3 per cent over the past three years and is estim ated at around 6.7 per cent for FY07 (ending June 
2007) driven by continued strong export demand for ready-made garments (RMG) and private domestic investment.  This year, agricultural growth  is expected to decline but a healthy expansion 
continues in manufacturing, construction, and service  sectors. Inflation remains moderate and, after 
reaching 7.2 per cent in FY06 following rising fuel  and transport costs, is projected to decline 
marginally to 6.5 per cent for the current fiscal year.  
3.      Progress has been achieved in reducing poverty and in making headway toward meeting 
the MDGs .  The recent household expenditure and inco me survey found that the poverty headcount 
ratio had declined by 9 percentage points to 40 per cent of the population between 2000 and 2005.  In 
conjunction with broad-based growth, innovative social programmes and expanded access to 
microfinance have supported a steady reduction in  extreme rural poverty and improvements in many 
human development indicators. 
4.      External vulnerabilities have been reduced and the external position is relatively robust.   
At the onset of the PRGF arrangement there was considerable external vulnerability, including: a 
fixed and misaligned exchange rate , a low level of international re serves, and anxiety about export 
prospects given the phase out of MFA quotas for garments.  The situation has improved during the 
PRGF-supported programme.  Confidence in the taka in creased following reform of the exchange rate 
regime and this has helped maintain exchange rate  stability and safeguard international reserves.  As 
the real effective exchange rate has depreciated  somewhat compared to FY03, improved external 
competitiveness has helped boost export growth at  around 20 per cent annually since 2005, beyond 
earlier expectations of the economy's potential resilie nce to the phase-out of the Multifiber Agreement 
(MFA).  Together with continued large remittance inflows that are growing by 30 per cent this year, 
and in spite of strong import growth, the external current account has shifted into surplus in FY06 and 
is expected to maintain a surplus of around 1 per cent of GDP this year.  Although net aid flows have 
been declining relative to GDP in recent years, gross official reserves rose to over $4 billion at end-
February 2007, equivalent to 2. 6 months of imports coverage. 
5.      These results attest to the authorit ies' prudent macroeconomic management .  The overall 
fiscal deficit has been contained at below 3½ per cent of GDP and domestic financing at below 2½ per cent of GDP for the past four years.  Total spending has been persistently lower than budgeted WT/BOP/R/76 
Page 6  
 
mainly on account of slower project implementa tion in the development budget.  However, tax 
revenue collection has persistently fallen short of the budget target and has seen little improvement 
over the last four years.  At 8½ per cent of  GDP, tax revenue remains among the weakest when 
compared to other low income countries, reflecting a number of factors including weaknesses in tax administration, lack of enforcement in collections , a cumbersome tax system that is difficult to 
administer, and inadequate strengthening of cust oms reform to ensure neutrality of the trade 
liberalization reforms (elaborated later).  Meanwh ile, the monetary policy stance has been broadly 
supportive of growth with broad money and private credit growing at close to 20 per cent;  but since 
early 2006, Bangladesh Bank has gradually tightened  its stance to contain inflationary pressures. 
6.      Reforms have also moved forward in stru ctural areas, albeit often with delays .  The three 
large insolvent nationalized commercial banks (N CBs) have been operating under new management 
teams with the aim of bringing them more in co mpliance with prudential regulations.  The recent 
decision to corporatize them will pave the way for their eventual divestment, following on the 
successful example of Rupali Bank which is expected to be turned over to private owners in April 
2007.  However, fuel price distortions continue.  De spite several adjustments, administered prices of 
diesel and kerosene are still below break-even leve ls, and this has contributed to accumulating losses 
in the state-owned petroleum company and placed a strain on the banking system.  
Outlook 
 
7.      Notwithstanding its achievements, Ba ngladesh still faces immense challenges .  Strong 
growth has helped reduce poverty and support subs tantial progress toward meeting its MDGs;  but 
higher growth is constrained by severe deficiencies in social services and infrastructure.  Catching up 
with its Asian neighbors will enta il capitalizing on the regional growth boom and globalization 
benefits.  Regulatory and governance reforms, partic ularly in the energy sector;  improving revenue 
mobilization, addressing capacity constraints, and e nhancing financial intermediation, would all help 
improve investor confidence and sustain higher growth. 
8.      Looking ahead, growth is expected to remain around 6½ to 7 per cent of GDP over the 
medium term .  Buoyant garment exports and remittance fl ows, as well as the possibility of higher aid 
and private flows, will likely help sustain investme nt so long as further structural reforms improve 
competitiveness and the investment climate.  
9.      Trade liberalization measures have helped st rengthen Bangladesh's competitiveness and 
its ability to weather the post-MFA challenges .  Tariff incidence was reduced in FY05 through a 
reduction in the level and dispersion of customs and supplementary duties, and the tariff reduction 
was accompanied by virtual elimination of trade-re lated quantitative restrictions (only 3 remain, on 
eggs, poultry and salt, which are subject to WTO wa iver until 2009).  The number of regulatory stages 
involved in the import for and export of RMG expor ts was also reduced and measures have been 
undertaken to improve port operation, as the new c ontainer terminal at Chittagong was recently placed 
under private management.  In the FY07 budget, st eps were taken to reduc e the rate of nominal 
protection by 2.2 percentage points (to 24.3 per cent) mainly by bringing down customs duties on intermediates, basic raw materials, and capital m achinery—and scaling back the two higher rates of 
the four-tier supplementary duties.  However, thes e changes have so far be en too modest to have 
significantly reduced the anti-export bias in the tr ade regime.  With one of the highest overall 
protection rates in the region and highly complex tr ade regulations, the authorities will need to take 
further steps toward liberalizing and streamlini ng the trade regime, including by addressing the 
cumbersome duty drawback system, tax concessions, and exemptions.  WT/BOP/R/76 
 Page 7 
 
 
10.      Although the current account position may deteriorate over the medium-term, the 
outlook remains manageable.   The current account could slip back  into a small deficit in the next 
couple of years, particularly if financial flow s and import growth strengt hen.  High dependence on 
garment exports (which account for three fourths of  all exports) remains an area of vulnerability, 
particularly in the event of intensified competiti on in world markets or shifting sentiments in global 
markets.  However, a mild slowdown in major economies is likely to have a limited impact on 
demand for lower-value-added apparel comprising the bulk of Bangladesh's exports.  Given the 
improved resilience to external shocks from the ex change rate regime and with continued trade 
reforms, the external position should be manageable, a nd official reserves are expected to continue to 
increase in line with the medium-term target of at least three months of imports.   WT/BOP/R/76 
Page 8  
 
FY03 FY04 FY05 FY06 FY07 FY 08 FY09 FY10 FY11 FY12 FY13
National income and prices (percent change) 
Real GDP 5.3 6.3 6.0 6.7 6.7 6.5 6.5 6.5 6.5 6.5 6.5
GDP deflator 4.5 4.2 5.1 5.6 5.8 6.2 5.0 4.0 4.0 4.0 4.0CPI inflation (annual average) 2/ 4.4 5.8 6.5 7.2 6.5 6.0 5.0 4.0 4.0 4.0 4.0
Central government operations (percent of GDP)
Total revenue 10.3 10.2 10.5 10.6 10.6 11.1 11.6 12.1 12.1 12.1 12.1
Tax 8.3 8.2 8.5 8.5 8.5 9.0 9.5 10.0 10.0 10.0 10.0
Nontax 2.0 1.9 2.0 2.1 2.1 2.1 2.1 2.1 2.1 2.1 2.1
Total expenditure 13.7 13.3 13.8 13.8 14.1 14.1 14.7 15.3 15.4 15.5 15.6
Current expenditure 8.1 7.8 8.4 8.4 8.7 8.2 8.3 8.1 8.0 8.0 8.0
Of which:  Interest payments 1.9 1.6 1.7 1.8 1.7 1.7 1.7 1.6 1.5 1.5 1.5
Of which:  Subsidies 2.3 2.4 2.8 2.6 3.0 2.4 2.5 2.5 2.4 2.4 2.4
Annual Development Program 5.4 5.0 5.0 4.7 4.6 5.1 5.3 6.0 6.2 6.5 6.6
Other expenditures 3/ 0.1 0.5 0.4 0.8 0.8 0.9 1.2 1.2 1.1 0.9 1.0
Overall balance (excluding grants) -3.4 -3.1 -3.3 -3.2 -3.5 -3.0 -3.1 -3.2 -3.3 -3.4 -3.5
Primary balance -1.5 -1.4 -1.7 -1.4 -1.8 -1.3 -1.4 -1.6 -1.8 -1.9 -2.0
Financing (net) 3.4 3.1 3.3 3.2 3.5 3.0 3.1 3.2 3.3 3.4 3.5
Domestic 4/ 1.2 1.8 1.7 2.1 2.4 1.8 1.7 1.6 1.6 1.6 1.6
External 2.1 1.3 1.6 1.2 0.9 1.2 1.4 1.6 1.8 1.9 2.0
Total central government debt (percent of GDP) 51.1 48.7 47.5 46.8 45.0 43.0 41.7 40.7 39.8 39.2 38.7
Money and credit (end of fiscal year; percent change)
Net domestic assets 12.2 13.5 17.1 19.6 13.5 15.8 15.2 15.1 15.1 14.6 14.6
Credit to private sector 12.6 12.5 18.1 18.8 17.1 14.1 14.0 14.3 14.7 14.3 14.4
Broad money (M2) 15.6 13.8 16.7 19.3 15.7 18.3 16.1 14.6 14.2 13.7 13.8
Balance of payments (in billions of U.S. dollars) 5/
Exports, f.o.b. 6.5 7.0 8.6 10.4 12.5 13.8 15.1 16.6 18.3 20.1 22.1
(Annual percent change) 9.5 7.2 23.2 21.6 19.9 10.1 9.9 9.8 10.0 10.0 10.0
Imports, f.o.b. -8.7 -9.8 -11.9 -13.3 -15.8 -17.5 -19.6 -21.6 -23.7 -25.9 -28.1
(Annual percent change) 13.1 13.0 20.6 12.1 18.6 11.0 11.6 10.5 9.6 9.2 8.8
 Current account 0.1 -0.5 -0.9 0.6 0.7 0.3 -0.3 -0.9 -1.4 -1.8 -2.1
(Percent of GDP) 0.1 -0.9 -1.5 0.9 1.0 0.4 -0.4 -1.0 -1.4 -1.7 -1.8
Gross official reserves (in billions of U.S. dollars) 2.5 2.7 2.9 3.4 4.1 5.2 6.2 6.8 7.3 7.7 8.2
In months of imports of goods and nonfactor services 2.9 2.8 2.5 2.6 2.6 3.0 3.2 3.2 3.1 3.0 3.0
Memorandum item:
Nominal GDP (in billions of taka) 3,006 3,330 3,707 4,177 4,715 5,333 5,964 6,605 7,316 8,103 8,975
Sources: Data provided by the Bangladesh authorities; and Fund staff estimates and projections.
1/ Fiscal year begins July 1. 
2/ CPI has recently been rebased using FY96 weights.
3/ Consists of other capital, net lending, food account balances, check float and discrepancy.
4/ Includes estimated privatization receipts of 0.2 percent of GDP in FY07.5/ Balance of payments is presented on the basis of BPM5.ProjectionTable 1. Bangladesh: Key Economic Indicators, FY03–13  1/
 
 
 
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