At the IMF-World Bank Spring Meetings held in Washington DC earlier this month, Bangladesh faced an uncomfortable moment of reckoning.
The IMF declined to release the next tranche of Bangladesh’s existing loan program by June, citing the country’s failure to implement agreed reforms in the revenue and banking sectors, and instead proposed negotiating a new lending arrangement with additional conditions.
The immediate financial consequence is significant: Bangladesh still has $1.86 billion remaining under the program, of which a $1.3 bn tranche had been expected by June.
The government has pushed back on characterizations of this as a suspension or refusal. The Finance Ministry described as “completely false” media reports claiming that the IMF had withheld the next loan tranche due to Bangladesh’s failure to implement reforms, clarifying that no final decision had been taken. Finance and Planning Minister Amir Khosru Mahmud Chowdhury told journalists that unresolved issues will be discussed again within the next 15 to 20 days.
The technical accuracy of that position notwithstanding, the broader reality deserves clear-eyed examination. Whether one calls it a pause, a delay, or a restructuring of the program, Bangladesh is not receiving the funds it anticipated -- and the reasons why tell an important story about where our economic reform agenda stands.
How we got here
Bangladesh’s $4.7 bn IMF loan program began on 30 January 2023. In June 2025, during the interim government’s tenure, an additional $800 min was added, bringing the total to $5.5 bn. So far, Bangladesh has received $3.64 bn across five installments.
The program was never unconditional budget support. From the outset it carried specific structural reform commitments -- on revenue mobilization, banking sector governance, energy subsidy rationalisation, and exchange rate management.
These conditions were understood and agreed upon at the time of signing. The disbursement of each tranche was explicitly tied to measurable progress against these benchmarks.
The delays did not begin recently. The fourth tranche, initially scheduled for approval at an IMF board meeting in February 2025, was delayed due to Bangladesh’s failure to meet two key conditions -- fully allowing the foreign exchange rate to be determined by the market, and collecting an additional Tk 12,000 crore in VAT beyond the government’s target.
What we are witnessing today is therefore not a sudden breakdown but the cumulative consequence of reform implementation that has consistently fallen short of committed timelines.
The four reform gaps
The IMF informed Bangladesh that the country had not implemented agreed conditions relating to revenue reform, banking reform, withdrawal of electricity and fuel subsidies, and a market-based exchange rate. Each deserves a brief examination.
On revenue, the challenge is structural and serious. Under the program, the IMF requires Bangladesh to increase its revenue-to-GDP ratio by 0.5 percentage points annually.
Bangladesh’s tax-to-GDP ratio has instead fallen over the last three years, creating a major obstacle to meeting the country’s economic needs.
A country that cannot mobilize sufficient domestic revenue becomes progressively more dependent on external financing -- precisely the vulnerability the IMF program was designed to address.
On the exchange rate, although Bangladesh had committed to introducing a market-based exchange rate, the IMF does not believe the current exchange rate system is genuinely market-driven.
The concern here is not merely technical. An artificially managed exchange rate distorts trade competitiveness, discourages remittance inflows through formal channels, and depletes foreign exchange reserves -- all of which Bangladesh has experienced in varying degrees over recent years.
On energy subsidies, under the program, Bangladesh pledged to remove subsidies on gas and electricity entirely by 2026. Although the previous government increased gas and electricity prices several times, prices were not increased during the 18-month tenure of the interim government. The new elected government has inherited this stalled commitment alongside rising global energy costs -- a difficult combination.
On banking sector reform, the situation carries particular complexity. As part of reforms made by the interim government, Bangladesh Bank drafted an amendment to the Bangladesh Bank Order strengthening central bank independence, and brought a Bank Resolution Ordinance to merge distressed banks.
However, the current government later amended the law, effectively allowing former owners to regain control of merged banks. The IMF expressed specific concern over the inclusion of Section 18A in the recently passed Bank Resolution Bill, which would allow former owners of banks placed under resolution to regain control. This particular reversal appears to have significantly affected the program’s momentum.
What happens next
The IMF has proposed starting discussions on a new loan program with additional conditions. Economists believe the IMF is now more interested in replacing the current program with a new agreement carrying stricter conditions.
This is not necessarily a worse outcome for Bangladesh -- a new program could provide a fresh framework with updated conditions that reflect current economic realities. But it would require the government to demonstrate a credible reform commitment that the current program’s history has called into question.
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.
This signalling effect is arguably more consequential than the withheld tranche itself. Bangladesh’s ability to mobilize financing from the World Bank, Asian Development Bank, and bilateral partners is partly conditioned on its standing with the IMF.
The deeper question
The IMF program was never simply about dollars. It was a framework for structural reforms that Bangladesh’s economy genuinely needs -- greater revenue mobilization, a more resilient banking sector, reduced fiscal dependence on subsidies, and a more transparent exchange rate mechanism.
These are not conditions imposed for the IMF’s benefit. They are reforms that serve Bangladesh’s long-term economic health regardless of any external lending arrangement.
The current impasse invites honest reflection on why reform implementation has proven so difficult. Some obstacles are genuinely complex -- energy price adjustments carry real social costs for lower-income households, and exchange rate liberalization carries short-term risks that policymakers reasonably weigh carefully. These tensions deserve acknowledgment.
But structural reform, by its nature, involves short-term discomfort in exchange for long-term stability. The consistency of the reform gaps across successive governments -- elected and interim alike -- suggests that the challenge is not merely one of timing or technical capacity. It reflects deeper institutional and political economy constraints that any serious reform program must eventually confront.
Bangladesh has demonstrated remarkable economic resilience over three decades. The foundations of that resilience -- a dynamic private sector, a hardworking labour force, strong remittance flows -- remain intact.
The IMF impasse is a setback, not a crisis. But navigating through it will require more than reassuring statements from Washington. It will require measurable progress on the reforms that successive governments have committed to and deferred.
The next 15 to 20 days of discussions will be telling.
Firoz Alam is a CFO, ex-banker, and financial analyst with 22 years of experience in Bangladesh’s banking and corporate finance sectors. The host of Finance with Firoz on YouTube, he writes on Bangladesh’s economy, global financial markets, and personal finance. firozalam.com.