Capital market can be a new source of long-term investment for the private sector to attain Bangladesh's higher growth, said Misuhiro Furusawa, deputy managing director of International Monetary Fund (IMF).

“There is clear scope to pursue capital market development to provide new vehicles to channel savings toward long-term investments”, he said while delivering a lecture at Dhaka University yesterday.

He addressed some challenges for the Bangladesh economy.

He said Bangladesh needs to increase private investment, which is very important if the country wants to sustain the recent high levels of growth, he said.

At the same time, a significant increase in public investment is also necessary to maintain competitiveness and generate further productivity growth, Furusawa said.

“Another way to achieve this needed increase in investment is to focus on raising revenues and lifting foreign direct investment,” the visiting IMF official said.

He also suggested Bangladesh implement the VAT law. In addition, policies that remove red tape and simplify the trade regime should be put in place, he noted.

Furusawa said there is also a risk from increased geopolitical tensions and the fear of terrorism. This fear has already affected the outlook for various countries, especially in the Middle East.

Increasing refugee flows have clear implications for many countries, including in the advanced economies, he said.

“It is essential to address the root causes of these problems”, he suggested.

In some advanced economies, there is a risk that an extended shortfall in private demand and inadequate progress on reforms could lead to permanently lower growth and lower inflation.

This could also have negative implications for debt dynamics, he said.

He also shed light on the recent developments in advanced economies that reflect discontent with globalisation.

“If this important political trend leads to increased protectionism, there could be implications for productivity and incomes, market sentiments and economic growth,” he added.

He said the issues that some emerging market economies face include high corporate debt, declining profitability, weak bank balance sheets, and thin policy buffers.

If not addressed, these issues could increase the exposure of some countries in case of tighter global financial conditions, he said.

The Bangladesh economy has undergone a major transformation over the past two decades. This change has been spearheaded by the rapid expansion of the garment industry, which has helped reduce poverty and raise the employment of women.

The result has been a sustained increase in per capita income. It is important to recognise that Bangladesh is making important progress towards its goal of achieving a middle-income status.

Bangladesh also stands out in terms of development indicators. Poverty has been nearly halved since 1990.

Bangladesh also stands out among low-income countries in terms of life expectancy, child mortality and access to water and sanitation.

In addition, there has been good progress on financial inclusion. This includes efforts to enhance access and usage of financial services.