Bangladesh is set to receive $1.3 billion from the International Monetary Fund (IMF) in its lending program's latest two tranches (fourth and fifth) after the lender’s board finally approved the payout.
The global lender also lowered Bangladesh's GDP growth projection to 5.4% for the 2025-26 fiscal year from its earlier forecast of 6.5%.
The IMF approved an additional support of about $806.42 million (SDR 567.19 million) the ECF and EFF programs and a six-month extension.
As a result, the total financial assistance under the ECF and EFF arrangements to about $4.1 billion, alongside concurrent RSF arrangements of about $1.4 billion.
Thus, this $4.7 billion program will now be about $5.5 billion in support.
Bangladesh Bank Governor Ahsan H Mansur confirmed the $1.3 billion approval at a program on Tuesday.
He said: “IMF Executive Board conformed our fourth and fifth installment, the first disbursement under the country's interim government.”
The approval follows a staff-level agreement reached in mid-May for the fourth review of the credit program.
The IMF staff and the Bangladesh authorities had reached staff-level agreement for the third review in December last year.
However, citing Bangladesh's repeated failure in fulfilling prerequisites, the IMF board held back approval for the loan's fifth and fourth tranches expected to be available in February and May respectively.
Two unmet tags, which stood as big barriers to approval for both the loan tranches, were enhancing revenue mobilization and ensuring exchange-rate flexibility.
The Fund granted the $4.7 billion loan to Bangladesh in January 2023 to help support the country's sluggish economy and slim foreign-exchange reserves. The loan was scheduled to be given in seven installments by May 2026.
Until now, the country has received $2.295 billion under this loan program.
Lower GDP growth for FY26
In a press release issued on Monday, the global lender said 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.
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 stabilize political and security conditions, fostering a gradual return to economic stability, the release stated.
Meanwhile, for the current fiscal year, the IMF now expects a 3.8% growth rate, which is lower than the Bangladesh Bureau of Statistics' estimate of 3.97%.
According to the Washington-based multilateral lender, Annual average inflation may be 6.2% in FY26, down from 9.9% in the outgoing FY25.
The lender also forecast that in FY27 inflation may up to 6.3%. However, it had earlier projected 5.18% inflation for FY26, in the World Economic Outlook published in April.
Assessment
Speaking about Bangladesh at the IMF Executive Board’s discussion Nigel Clarke, Deputy Managing Director and Acting Chair, said: “Bangladesh’s economy continues to navigate multiple macroeconomic challenges. Despite a difficult environment, program performance has remained broadly on track, and the authorities are committed to implementing necessary policy actions and reforms. The IMF-supported programs are helping safeguard macroeconomic stability and protect the most vulnerable, while accelerating reforms to support resilient and inclusive growth.
“Near-term policies should prioritize rebuilding external resilience and reducing inflation. The authorities’ recent steps to implement a new exchange rate regime and include revenue-enhancing measures in the FY26 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 rationalize 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 prioritize 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.
