The International Monetary Fund (IMF) has warned that Bangladesh if it does not make significant economic reforms, it risks slowing its growth to 3.5% in the fiscal year 2027. If there is no clear drive to increase revenue mobilization, to create fiscal space, and to strengthen the vulnerabilities, growth may not improve significantly and will only be further undermined in the medium term.
IMF Mission Chief for Bangladesh Ivo Krznar said that the economic prospects are now very challenging for Bangladesh with major downside risks. Ongoing stress in the banking sector, across-the-board fiscal problems and growing external pressures are the challenges. The projections were presented after a five-day fact-finding mission that ended on July 16, looking at financial developments in the country and laying the basis for further technical assistance.
Structuring the New Loan and Phased Economic Reforms
After talks with the IMF team, Finance Minister Amir Khosru Mahmud Chowdhury said that any reforms that follow a new loan program will be carried out in a measured manner. He said from the Ministry of Finance that the policy changes will be gradual and will be closely followed by the priorities set by the elected government.
As a way to stabilize the economy, IMF strongly encourages the use of tight monetary policy and prudent fiscal policy to control inflation and restore foreign exchange reserves. The agency also emphasized the importance of adopting crawling peg exchange rate regime to achieve external stability. In addition, extensive restructuring efforts are needed to clean up the financial sector and to ensure an active macro-financial stability.
Due partly to the current geopolitical conflict in the Middle East, Bangladesh is facing costs of imports and subsidy expenses. But the IMF observed the country could have a much brighter medium-term future if its authorities could speed up the revenue collection and reform subsidies along with providing targeted social protection for the vulnerable households.
The continuous economic discussion comes after a significant change in the financial plans of Bangladesh. Earlier, the country had signed an IMF program for $4.7 billion in 2023 to address the foreign exchange crisis, and this was subsequently increased to $5.5 billion. The new administration, after receiving approximately $3.59 billion, in June, suspended the deal, saying several earlier reform requirements were no longer possible.
The administration is now asking for a new $4 billion to $4.5 billion loan, based on the economy’s new conditions. The institutional process is expected to start after the IMF-WB Annual Meetings in October, provided the recent mission is able to give an favourable internal assessment of the new program.
The administration is now seeking a fresh $4 billion to $4.5 billion loan aligned with current economic realities. Formal negotiations for the new program are expected to begin after the IMF-World Bank Annual Meetings in October, pending a positive internal assessment from the recent mission.
