IMF board okays $1.3b of $4.7b loan programme for Bangladesh
Bangladesh’s macroeconomic challenges have increased since the popular uprising in the summer of 2024, which led to the ouster of the previous government.
The International Monetary Fund (IMF) has approved a US$1.3 billion disbursement of the third and fourth tranches of Bangladesh’s $4.7 billion loan programme.
“The Executive Board of the IMF completed the combined 3rd and 4th Reviews of Bangladesh’s arrangements under the Extended Credit Facility (ECF), the Extended Fund Facility (EFF), and the Resilience and Sustainability Facility (RSF). The Executive Board also approved an augmentation of SDR 567.19 million (53.2 per cent of quota) for the ECF/EFF arrangements and a six-month extension. Completion of these reviews allows the authorities to immediately withdraw SDR 650.5 million (about $884 million) under the ECF/EFF, and SDR 333.3 million (about $453 million) under the RSF,” said an IMF press release issued today.
Further, the IMF Executive Board approved a modification of performance criteria and granted a waiver for the non-observance of the performance criterion related to the non-imposition and non-intensification of exchange restrictions, based on the temporary nature of the non-observance and the implementation of corrective measures.
Bangladesh’s arrangements under the ECF/EFF/RSF were approved on 30 January 2023, in an amount equivalent to SDR 2.5 billion (154.3 per cent of quota or about US$3.3 billion) under the ECF/EFF and SDR 1 billion (93.8 per cent of quota or about US$1.4 billion) under the RSF (PR no. 23/25).
The augmentation approved by the Executive Board on Monday brings the total financial assistance under the ECF and EFF arrangements to SDR 3,035.65 million (about US$ 4.1billion), alongside concurrent RSF arrangements of SDR 1 billion (about US$1.4 billion).
The enhanced ECF/EFF is aimed at restoring macroeconomic stability, promoting inclusive growth, and protecting the vulnerable. The RSF arrangement has secured fiscal space needed to build resilience against climate risks.
Bangladesh’s macroeconomic challenges have increased since the popular uprising in the summer of 2024, which led to the ouster of the previous government.
The timely formation of an interim government has helped stabilise political and security conditions, fostering a gradual return to economic stability.
However, the economic outlook has worsened due to persistent political uncertainty, continuation of tighter policy mix, rising trade barriers, and increasing stress in the banking sector.
Programme performance for the third and fourth reviews remains broadly satisfactory despite the difficult political and economic context.
The authorities are fully committed to implementing necessary policies under the program and have recently pressed forward with critical reforms to increase exchange rate flexibility and boost tax revenues.
The authorities have consented to the publication of the Staff Report prepared for this consultation. Following the Executive Board’s discussion, Mr. Nigel Clarke, Deputy Managing Director, and Acting Chair, made the following statement:
“Bangladesh’s economy continues to navigate multiple macroeconomic challenges. Despite a difficult environment, programme performance has remained broadly on track, and the authorities are committed to implementing necessary policy actions and reforms.
The IMF-supported programmes are helping safeguard macroeconomic stability and protect the most vulnerable, while accelerating reforms to support resilient and inclusive growth.
“Near-term policies should prioritise rebuilding external resilience and reducing inflation. The authorities’ recent steps to implement a new exchange rate regime and include revenue-enhancing measures in the FY2026 budget are welcome. A balanced policy mix—anchored in maintaining a tight monetary policy stance, greater exchange rate flexibility, and revenue-based fiscal consolidation—will support efforts to restore both external and internal balances.
“Efforts to raise tax revenues and rationalise expenditures—including through subsidy reduction—are critical for creating the fiscal space needed to strengthen social, development, and climate initiatives. Sustained progress in reducing government subsidies to a fiscally sustainable level, along with enhanced public financial management, is essential to improving spending efficiency and mitigating fiscal risks.
“Financial sector policy should prioritise safeguarding stability and addressing rising vulnerabilities. Developing a comprehensive, sequenced strategy to guide reforms is an immediate priority, followed by the swift implementation of the new legal frameworks to enable orderly bank restructuring while protecting small depositors.
“Sustained structural reforms are essential for Bangladesh to achieve its goal of attaining upper middle-income status. Key priorities include diversifying exports, attracting greater foreign direct investment, strengthening governance, and enhancing data quality.
“Building resilience to natural disasters is essential for achieving high and inclusive growth. The RSF’s focus on strengthening institutions and policy coordination as well as on enhancing the efficiency of climate-related spending remains critical, including in helping mobilize climate finance.”