IMF国际货币组织全球-Bangladesh_Selected-Issues_17页_1mb

Summary of the Selected Issues Paper on Bangladesh

Core Content

This document outlines key issues related to climate change mitigation and adaptation and export diversification in Bangladesh, based on an IMF staff analysis completed on August 5, 2019. It provides an overview of the country's vulnerability to climate change, government responses, and forward-looking policy options to enhance resilience and economic sustainability.

Climate Change Impact on Bangladesh

Bangladesh is highly vulnerable to climate change due to:

• Geographical factors: 60% of its land is at 5 meters or less above sea level, making it susceptible to tropical cyclones, storms, and tidal surges.
• Economic and social consequences: Natural disasters cause significant loss of life, crop damage, infrastructure destruction, and industrial disruption, with the worst flooding in 1998 costing nearly 5% of GDP.
• Future risks: By 2050, sea level rise could lead to a loss of 17% of land and 30% of food production. Rural migration is expected to worsen urban overcrowding and living conditions.
• Current risk level: One-third of the population is at risk of displacement due to rising sea levels.

Government Response to Climate Change

Bangladesh has taken proactive steps to address climate change, despite being a minor contributor to global greenhouse gas emissions:

• INDCs: Submitted early in the context of the UNFCCC, aiming to reduce emissions by 5% below BAU in the power, transport, and industry sectors by 2030 (unconditional) and 15% with international support (conditional).
• Fiscal measures: The Climate Fiscal Framework (CFF) was established in 2014 to integrate climate-related spending into the medium-term budget. It covers 20 ministries (45.8% of the national budget).
• Allocation: 8.8% of the national budget (0.75% of GDP) is directed towards climate change mitigation and adaptation, with the largest share going to food security, social protection, and health (46%), followed by infrastructure (28.4%).
• Green financing: The Bangladesh Bank has introduced mechanisms like the Green Transformation Fund (GTF) and Environmental Risk Management Guidelines to support low-carbon development and manage climate risks in the financial sector.

Forward-Looking Policy Options

Fiscal Policy Options

1. Reduce energy subsidies:

   • Pre-tax energy subsidies in 2017 amounted to USD 1.05 billion, while post-tax subsidies (including environmental costs) reached USD 8.83 billion (3.4% of GDP).
   • Eliminating subsidies would reduce distortions and free up resources for climate adaptation and mitigation.

2. Introduce a carbon tax:

   • Could raise 1% of GDP in revenue.
   • Easily implemented by linking to existing fuel taxes.
   • Helps limit urban pollution and finance targeted transfers.
   • Should be introduced gradually, starting with petrol and diesel before expanding to fuel oil and coal.

3. Establish fiscal buffers:

   • Introduce a dedicated contingency line in the national budget for emergency relief and crisis management.
   • Consider a natural disaster reserve fund with strict governance and transparency.

4. Promote insurance mechanisms:

   • Use catastrophe bonds and insurance instruments to transfer climate risk to better-equipped entities.
   • Challenges include risk pricing and loss estimation.

Export Diversification

Current State of Diversification

• Bangladesh's economy has become more concentrated and less complex compared to neighboring countries due to its heavy reliance on the RMG sector (over 80% of total exports).
• The economic complexity index (ECI) indicates a decline in complexity since the 1990s, with the RMG sector becoming more ubiquitous as other countries also gain comparative advantage in similar products.

Comparison with Neighbors

• Vietnam has shown a greater integration into global value chains, with a more diversified export base and higher complexity.
• Bangladesh lacks comparative advantage in intermediate goods needed for more complex final products, limiting its ability to integrate into global supply chains.

Looking Forward: Policy Recommendations

1. Stimulate private sector participation:

   • Improve the business environment to attract foreign investment in climate-friendly technologies.
   • Provide lending incentives and taxation tools to encourage green investments.

2. Enhance human capital:

   • Invest in education and skills development to prepare the labor force for new industries.
   • Support productivity improvements in the RMG sector to free resources for diversification.

3. Integrate into global supply chains:

   • Focus on intermediate goods production to increase export complexity.
   • Strengthen linkages between industries to foster economic integration.

4. Develop a project pipeline:

   • Build a portfolio of climate-related projects to attract concessional financing.
   • Increase awareness of climate challenges and negotiating capacity with international donors.

Financial Support from Donors

• The Green Climate Fund (GCF), established in 2013, provides financial support for climate adaptation and mitigation in developing countries.
• As of July 2019, the GCF had a total value of USD 18.7 billion, with USD 5.2 billion committed and USD 2.4 billion in projects.
• Bangladesh has received USD 85 million in grants from the GCF for climate change projects.
• The authorities should intensify efforts to secure higher concessional financing and develop a robust project pipeline.

Key Figures and Data

• Climate relevant budget allocation: 8.8% of the national budget (0.75% of GDP) is allocated for climate change activities.
• Green financing: As of end-March 2019, TK 30.493 billion (USD 360 million) was invested in green financing, representing 1.29% of banks' total loan disbursements.
• Energy subsidies: Pre-tax subsidies in 2017 were USD 1.05 billion, while post-tax subsidies were USD 8.83 billion (3.4% of GDP).
• RMG sector: Accounts for over 80% of exports, contributing to economic concentration and low complexity.

References

• Sadiq Ahmed, Bazlul H. Kondler, 2018, Towards a Carbon Tax in Bangladesh, Policy Research Institute, Dhaka.
• Government of Bangladesh, 2015, Intended Nationally Determined Contributions, Ministry of Environment and Forests.
• Government of Bangladesh, 2018, Climate Financing for Sustainable Development, Budget Report 2018-19, Ministry of Finance.
• Government of Bangladesh, 2019, Integrating Climate Change in the Medium-Term Macro Framework, Ministry of Finance.
• International Monetary Fund, 2013, Energy Subsidy Reform: Lessons and Implications, IMF.
• International Monetary Fund, 2016, After Paris: Fiscal, Macroeconomic and Financial Implications of Climate Change, IMF.
• International Monetary Fund, 2018, Coping with Natural Disaster Risk in Sri Lanka, IMF.
• International Monetary Fund, 2019, Building Resilience in Developing Countries Vulnerable to Large Natural Disasters, IMF.
• International Monetary Fund, 2019, Fiscal Policies for Paris Climate Strategies: From Principle to Practice, IMF.
• International Monetary Fund, 2019, Global Fossil Fuel Subsidies Remain Large: An Update Based on Country-Level Estimates, IMF.
• World Bank, 2017, Bangladesh Development Update, September 2017.
• World Bank, 2018, Enhancing Opportunities for Clean and Resilient Growth in Urban Bangladesh: Country Environmental Analysis.
• World Bank, 2018, Policy Note on Options for a Carbon Tax in Bangladesh.