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The International Monetary Fund (IMF) has begun formal discussions with Bangladesh on a new lending programme, identifying weak revenue mobilisation, high inflation, vulnerabilities in the banking sector and external pressures stemming from the Middle East conflict as the country’s key economic challenges.
The IMF said boosting tax revenue, rationalising subsidies, maintaining a tight monetary policy and undertaking comprehensive banking sector reforms would be critical to addressing these challenges.
It added that detailed discussions on the size of the new programme, financing and reform commitments would continue over the coming months.
An IMF delegation, led by mission chief Ivo Krznar, visited Dhaka from July 12 to 16 at the government’s request to review Bangladesh’s recent economic developments, reform agenda and the framework for a possible new IMF-supported programme.
On the final day of the visit, the delegation met Finance Minister Amir Khasru Mahmud Chowdhury.
In a statement issued after the meeting, the IMF said the fact-finding mission assessed recent macroeconomic and financial sector developments, the government’s policy priorities, reform agenda and capacity-building needs.
The Fund said discussions on the scope, financing and policy commitments of a potential new programme would continue in the months ahead.
According to the IMF, Bangladesh continues to face significant fiscal, financial sector and inflationary challenges, with the ongoing conflict in the Middle East further intensifying economic pressures.
Rising global energy and commodity prices, along with supply chain disruptions, have renewed inflationary pressures, while higher subsidy costs have added to fiscal strains amid limited revenue capacity.
The IMF also noted growing pressure on the external sector due to higher import costs. Although remittance inflows remain strong, elevated import bills continue to weigh on the country’s external balance. It added that stress in the banking sector remains high.
The discussions were based on the policy priorities identified in the IMF’s 2025 Article IV Consultation.
The Fund stressed the need for significantly higher domestic revenue mobilisation and subsidy rationalisation to create fiscal space for greater spending on social protection and development.
It also recommended expanding targeted social safety net programmes to protect vulnerable groups from the impact of revenue reforms.
To curb inflation and rebuild foreign exchange reserves, the IMF urged Bangladesh to maintain a tight monetary stance and prudent fiscal policy.
It also encouraged continued implementation of the crawling peg exchange rate regime introduced in 2025 to allow greater exchange rate flexibility and strengthen external stability.
On the banking sector, the IMF called for a credible and comprehensive restructuring strategy to address longstanding weaknesses in an orderly manner, saying such reforms would help safeguard macroeconomic and financial stability while supporting private investment.
The Fund also warned that Bangladesh’s economic growth could slow significantly without sustained reforms.
According to IMF staff projections, GDP growth could fall to 3.5% in FY2027 if key reforms are not implemented, and decline to below 3% over the medium term if revenue mobilisation, fiscal resilience and banking sector reforms fail to improve.
The IMF cautioned that risks to Bangladesh’s economic outlook remain tilted to the downside, as weaknesses in the banking sector, fiscal pressures and external vulnerabilities could reinforce one another.
The delegation thanked the government and relevant authorities for their hospitality and constructive discussions, expressing its commitment to continuing close engagement with Bangladesh in the period ahead.
