The government is preparing to negotiate a new multi-billion-dollar credit facility with the International Monetary Fund (IMF).
Moving beyond simple balance-of-payments support, the proposed structural program aims to reshape Bangladesh's banking governance, tax administration, energy subsidies, and macroeconomic stability frameworks.
A high-level IMF delegation, led by Bangladesh Mission Chief Ivo Krznar, is scheduled to visit Dhaka from July 12-17.
The bilateral discussions will focus on a proposed three-year financial package valued between $4.5 billion and $5 billion, alongside a comprehensive economic reform roadmap.
While state planners view this facility as necessary to protect foreign exchange reserves, economists note that the associated policy conditions could introduce short-term inflation and fiscal adjustments for the public.
The new request follows an earlier $4.7 billion loan agreement signed in 2023, which was later expanded to $5.5 billion.
While $3.64 billion has been disbursed under that facility, the release of remaining tranches faced delays due to slow progress on revenue collection goals, market-based exchange rate adjustments, and financial sector governance reforms.
Recognizing that changing economic realities require an updated framework, the administration is seeking a fresh three-year arrangement.
Finance ministry officials emphasize that the new package is designed as a structured program to address long-term fiscal vulnerabilities.
Securing fresh concessionary financing has become critical as Bangladesh enters a period of heightened external debt obligations.
A slow recovery in domestic revenue collection and persistent pressure on foreign currency reserves have made debt management a key policy priority.
According to Ministry of Finance data, Bangladesh's external debt principal repayments over the next three fiscal cycles will total $12.29 billion (approximately Tk1.5 lakh crore at current exchange rates).
Without new external financing inflows, servicing these liabilities could deplete central bank foreign exchange reserves, increasing the risk of currency depreciation and imported inflation.
Restructuring the banking sector is a top priority under the proposed IMF framework.
Years of elevated non-performing loans (NPLs), weak regulatory oversight, and liquidity constraints have pressured public confidence, leaving several commercial lenders dependent on central bank liquidity support.
Finance Minister Amir Khasru Mahmud Chowdhury recently stated: "To achieve a sustainable economic recovery, we must first restore financial health to our banking sector."
The government's strategy includes merging undercapitalized banks, upgrading asset recovery frameworks, and strengthening central bank enforcement capacity.
A central element of this reform involves reviewing Section 18(a) of the Bank Resolution Act, an amendment introduced via an earlier ordinance.
The clause drew criticism from parliamentary opposition groups and international development partners, who argued it could allow distressed business conglomerates, such as the S Alam Group, to regain control of restructured financial entities.
Last December, five financial institutions—Exim Bank, Social Islami Bank, First Security Islami Bank, Union Bank, and Global Islamic Bank—were merged to form Sammilito Islami Bank. Aside from Exim Bank, four of these entities were previously linked to the S. Alam Group.
Dr Zahid Hussain, former lead economist at the World Bank's Dhaka office, noted that repealing Section 18(a) would send a positive signal to international financial institutions.
He emphasized that the focus must remain on protecting depositor assets and ensuring transparent corporate governance.
Officials report that amending or repealing this clause is currently under active consideration to help smooth negotiations for the new IMF facility.
Price realignment risk
To improve energy security and manage fiscal deficits, the government is updating its long-term LNG supply contracts, expanding clean energy investments, and reviewing power sector pricing.
However, this area presents clear challenges for consumer price stability. IMF programs typically require the systematic reduction of energy subsidies to ease budget pressures.
- Previous IMF-guided adjustments led to direct increases in retail electricity, industrial gas, and fuel prices.
- If the new program requires further subsidy cuts, the resulting increases in power, gas, and commercial transit costs could feed into the broader retail supply chain, adding to cost-push inflation for consumers.
The IMF has consistently pointed to Bangladesh’s low revenue collection capacity as a core vulnerability.
The country's tax-to-GDP ratio currently stands below 7%, among the lowest in South Asia.
Former finance secretary Mahbub Ahmed observed that while structural energy and banking reforms are necessary for long-term growth, balancing these changes with public affordability remains a key challenge for policymakers.