IMF asks Bangladesh to undertake reforms before releasing US$2 billion package

Bangladesh Government needs to speed up structural reforms to increase revenue, create employment that could help the country to overcome the short-term challenges, officials of the International Monetary Fund (IMF) told the media at a briefing on the sidelines of the Spring Meetings of the IMF and World Bank in Washington DC, said.

IMF, the global financial watchdog, is pushing Bangladesh Government to undertake structural reforms to boost government revenues to reduce energy and other subsidies and invest in development works.

Bangladesh is currently under a US$5.5 billion loan programme, with US$1.3 billion due in two instalments by June this year. The World Bank is expected to provide US$400 million in budget support. The regional conflict in the Gulf has pushed energy prices that has created an energy crisis in Bangladesh, shutting down a number of power plants and the only oil refinery in the country which has resulted in power shortage across the country.

Without lack of new funds, the situation might become alarming for the new government that came to power in February this year. The government will need to increase power and utility tariffs as well as the price of gasoline and expand the tax base to broaden the income base for the government.

“I would say that in terms of revenue intake, Bangladesh has not done well. It's on the lower side, and revenue intake has slipped over the last three years. So a lot of reforms are needed in Bangladesh, both on the fiscal side, on the revenue side, and trying to rehabilitate the financial sector and on the exchange rate reform,” Krishna Srinivasan, IMF Director for Asia Pacific Department, told at the press conference.

“In the case of Bangladesh, their revenue base is on the lower side, their revenue intake is on the lower side, and so they are much more hard-pressed to provide support. But again, people are hurting in Bangladesh, so it's even more important to use whatever resources you have to make it as targeted as possible.

“I think at the same time, they need to really work towards improving their revenue intake, which is among the lowest in the world. And they also need to take into account other impediments in the financial sector and so on, so that they can get growth going over the near term and over the longer term.”

Bangladesh Finance Minister Amir Khosru Mahmud Chowdhury is in Washington to secure additional funding that could help his government manage the current situation.

Officials at the IMF-World Bank Spring Meetings in Washington, D.C. confirmed that the lender is reluctant to proceed under the current US$5.5 billion programme without a comprehensive review and is instead pushing for a new arrangement with stricter conditions. Bangladesh still has about US$1.86 billion left to be disbursed before the programme expires in early 2027.

The IMF has flagged limited progress in critical areas, including revenue mobilisation, banking sector restructuring, subsidy rationalisation, and the shift to a market-based exchange rate. Concerns have also been raised over recent policy moves, particularly provisions allowing former owners of failed banks to regain control-seen as a setback to financial sector reforms.

“So the three pillars on which the programme was based, all of those, there's work to be done. Work to be done,” Mr Srinivasan, reiterated.

“I met with the Prime Minister, and met with the Finance Minister, and so on. And we had a good discussion in terms of the challenges the country faces, and made the point that a new government with a significant majority, this is the right time to undertake ambitious reforms. And so they heard us, and now we'll wait to see how they react to that.

“Like other countries in Asia, Bangladesh is also affected by the energy shock. They import a lot of energy, so they're affected by the shock. We are working with the authorities in terms of policy support and on the programmes, and negotiations are on-going, discussions are on-going. So we'll have to just wait and see how those things pan out.”

The standoff highlights deeper structural weaknesses in the economy. Bangladesh’s tax-to-GDP ratio has declined in recent years, while the banking sector remains fragile and burdened with governance issues. Despite commitments, reforms have largely stalled, especially during the transition from the interim government to the current administration.

Economists warn that the delay could have wider implications beyond immediate funding gaps. IMF assessments often influence other development partners, meaning prolonged uncertainty could complicate access to external financing at a time when the country faces rising fuel import costs and pressure on foreign exchange reserves, according to press reports.