Govt approaches IMF again for a loan
According to Bangladesh Bank data, by the end of April 2026, private sector loan growth stood at 4. 75 per cent. Due to high interest rates, rising non-performing loans, reluctance to invest, and business uncertainty, loan growth has been on a downward trend for a long time, resulting in less job creation.
Bangladesh has applied for a new three-year loan from the International Monetary Fund (IMF).
On June 9th, Finance and Planning Minister Amir Khosru Mahmud Chowdhury formally sent a letter to the IMF regarding this matter.
The loan amount was not mentioned in the minister's letter, but sources from the finance ministry indicate that the possible amount could be between US$4-4. 5 billion. However, the final decision will be made by the IMF's executive board.
Countries typically turn to the IMF for loans when they are under economic pressure. The interest rates on IMF loans are low, but the terms are strict. Governments are required to enact various reforms as per the IMF's conditions, and if the reforms are not implemented successfully, the IMF can halt the disbursement of loan installments.
Earlier, due to IMF conditions, the government subsidy on fuel in Bangladesh has been nearly withdrawn, and a monthly pricing mechanism has been introduced.
Following a decline in foreign exchange reserves, the Awami League government signed a loan agreement of $4. 7 billion with the IMF in 2023, which was later increased to $5. 5 billion during the interim government period ending in June 2025.
Under the approved loan programme, Bangladesh received a total of $3. 64 billion in five installments, but the discussion for the sixth installment lasted nearly a year without resolution due to unmet conditions.
During the annual meeting of the World Bank-IMF in Washington DC last October, the economic advisor of the previous interim government, Salehuddin Ahmed, was unable to convince the IMF to release the installment.
According to the debt bulletin published last month, the total debt, both domestic and foreign, increased to Tk 22. 06 trillion by 31 December 2025, during the interim government period. In other words, in less than a year and a half, government debt increased by more than Tk 3. 17 trillion.
The new BNP (Bangladesh Nationalist Party) government approached the IMF for a new loan at a time when the country's foreign exchange reserves were relatively strong, largely due to reduced imports. However, if imports increase, there is a risk that reserves might decrease. Additionally, the government needs extra funds to implement a large budget.
Finance Minister Amir Khosru Mahmud Chowdhury mentioned in his letter to the IMF that the economic and policy contexts from the time of the previous programme adoption are no longer valid.
According to him, due to domestic political economy, global uncertainty, and new challenges, some reforms were difficult to implement. However, the government does not want to abandon the reform programme but instead aims to implement it gradually, in line with the country's realities.
When asked about this application, the finance minister recently told Prothom Alo that a letter has been sent to the IMF for a new loan programme, and a team from the organisation will visit Dhaka next month.
Adverse economic situation
The country's revenue collection situation is not in good shape. The tax-to-GDP (Gross Domestic Product) ratio hovers around 8 per cent. By the end of the current fiscal year, the deficit could stand at Tk 880 billion. The IMF has long identified Bangladesh's low tax-to-GDP ratio as a significant weakness.
Due to domestic political economy, global uncertainty, and new challenges, some reforms were difficult to implement. However, the government does not want to abandon the reform programme but instead aims to implement it gradually, in line with the country's realities.
At the time of the Awami League government's departure, the balance of internal and external debt stood at Tk 18. 89 trillion. According to the debt bulletin published last month, the total debt, both domestic and foreign, increased to Tk 22. 06 trillion by 31 December 2025, during the interim government period. In other words, in less than a year and a half, government debt increased by more than Tk 3. 17 trillion.
Additionally, once Bangladesh exits the list of Least Developed Countries (LDCs), it will no longer be able to secure long-term loans at low interest from multilateral and bilateral development partners.
Finance Minister Amir Khosru Mahmud Chowdhury stated in a written answer in Parliament last Tuesday that by the end of March this year, Bangladesh's external debt stood at $78. 22 billion, with 61. 97 per cent of it being concessional loans at low interest.
He also mentioned that in the coming years, the pressure to repay the principal and interest of the government will increase.
Meanwhile, in the proposed budget for the fiscal year 2026-27 presented by the finance minister in Parliament on 11 June, there is a target to take Tk 1. 56 trillion in external loans, with an allocation of Tk 460 billion equivalent in foreign currency for interest payments. Fifty seven per cent of the total government debt is domestic, indicating that the government is borrowing heavily from the local banking system when private sector loan growth has fallen below 5 per cent.
According to Bangladesh Bank data, by the end of April 2026, private sector loan growth stood at 4. 75 per cent. Due to high interest rates, rising non-performing loans, reluctance to invest, and business uncertainty, loan growth has been on a downward trend for a long time, resulting in less job creation.
During the July-May period (11 months) of the current fiscal year, export earnings amounted to $43. 80 billion, which is 2. 55 per cent less than the same period of the previous year. The only positive indicator is remittance income. From 1 July to 23 June of the current fiscal year, the country received $34. 99 billion in remittance, which is 17. 8 per cent higher than the same period of the previous fiscal year.
Bangladesh will face challenging reform questions such as those related to revenue, the banking sector, the exchange rate, and fuel price determination. The IMF might provide time, but there is not much scope to avoid reforms.
Through the new programme, Bangladesh seeks financing to cope with foreign exchange pressure while restructuring the stalled reforms of the previous programme based on new timelines and realities.
Upcoming IMF pre-mission
According to sources in the finance ministry, a virtual meeting between the finance minister and the IMF was held on 21 May to discuss the new three-year programme.
Subsequently, on 3 June, the IMF's country mission chief for Bangladesh, Ivo Krznar, stated in a press release that the macroeconomic and political landscape in Bangladesh had changed significantly following the approval of the 2023 programme. Weaknesses in the banking sector, low revenue collection, and the need for new reform initiatives are now more apparent, creating an opportunity for a new programme reflective of current challenges and the new government's priorities.
An IMF pre-mission is set to visit Dhaka in mid-next month (July) as a continuation of that statement, according to a senior official in the finance division.
The delegation will stay for about a week, meeting with various government agencies, policymakers, and stakeholders. They will assess the recent economic situation, policy priorities, progress in reform activities, and future challenges. Discussions will also be held on the possible size of the new loan programme.
Reform questions and pressure on the public
In discussions about the new programme, increasing revenue collection, VAT reform, reducing tax exemptions, and modernising tax administration are expected to be key topics, according to relevant sources.
The IMF will also examine the implementation of a fully market-based exchange rate, ensuring good governance in the banking sector, restructuring weak banks, and progress in reducing non-performing loans.
The pre-mission arriving in Dhaka next month will assess the government's preparedness and progress on these issues.
However, if the new loan programme is approved, some associated reforms could increase pressure on the general public. Expanding the scope of taxes and VAT, reducing tax exemptions, lowering subsidies in the energy sector, and implementing a more market-based exchange rate may pose a risk of increasing the prices of goods and services.
The government has already informed the IMF that the reform programme will be implemented gradually and aligned with the country's realities to avoid sudden excessive pressure on the public.
Zahid Hussain, former lead economist of the World Bank's Dhaka office, told Prothom Alo that there needs to be an analysis of why the previous programme stalled.
According to him, lack of progress on essential issues like automatic fuel price adjustment, revenue sector reforms, market-based exchange rates, and banking sector reforms might have been the main barriers.
Stating that in the new programme, old issues may resurface, Zahid Hussain further said, "Bangladesh will face challenging reform questions such as those related to revenue, the banking sector, the exchange rate, and fuel price determination. The IMF might provide time, but there is not much scope to avoid reforms."