The IMF's October World Economic Outlook forecasts 3.2% growth for Bangladesh in FY27, down from 4.3% in April, with average inflation rising to 10.9%.
A week earlier, the World Bank cut its own forecast to 3.4% and said the weakness would persist through FY28, while it expects South Asia to grow at 6.9%.
If the IMF is right, this will be the slowest growth since FY1988-89, and place Bangladesh last among the seven South Asian economies in its table.
India is projected to grow at more than twice Bangladesh's rate. Sri Lanka, which defaulted on its external debt in 2022, is projected to grow faster than Bangladesh this year, as are Pakistan and Nepal. The medium-term outlook is weaker still, as the IMF projects Bangladesh's growth to fall to 2.2% in FY28 (Figure 1).
Yet over the same months, despite the grim forecasts for growth, the news from Dhaka has been of foreign governments and multilateral lenders showing strong interest in deepening their investments in Bangladesh.
The joint declaration of Bangladesh and China in June committed the two governments to modernize Mongla Port, develop a Chinese economic and industrial zone in Chittagong, and speed up the feasibility study for the Teesta project. In August, the Chinese ambassador said these projects could attract around 30 Chinese companies investing about $500 million.
Japan signed an Economic Partnership Agreement with Bangladesh in February and an emergency support loan for economic resilience and energy supply in June. Its plans now go further, as senior Japanese diplomats told The Hindu last week that Tokyo wants to build an industrial value chain around the JICA-financed deep-sea port at Matarbari, linking India's seven northeastern states, Nepal, Bhutan, and Myanmar to the Bay of Bengal. Prime Minister Tarique Rahman is expected in Tokyo at the end of October to seek Japanese financing for a Matarbari industrial, port, and commercial hub for 2026-2031.
On October 13, the Dutch minister for foreign trade and development cooperation met the PM, who welcomed Dutch interest in the Teesta feasibility study. A senior US State Department adviser has said Bangladesh could soon become eligible for financing from the US international development finance corporation. South Korea expects its trade agreement with Bangladesh, still awaiting signature, to raise Korean investment.
The multilateral lenders show the same interest. Bangladesh is the largest borrower from the World Bank's International Development Association, with an exposure of $22.7bn as of March 2026. The ADB committed$2.685bn to Bangladesh in FY26. The relationship with the IMF is also intact.
The finance minister's statement on October 4 that he had cancelled the IMF program was read as an exit. In fact, the IMF confirmed in June that Bangladesh had applied for a new program, and in July, the finance minister said the two sides had agreed on its broad framework.
Little more than a week after his statement, the minister sought the support of the IMF and the World Bank in Bangkok. The government is leaving the program it inherited to negotiate new conditions. It is not leaving the fund.
Why would these governments and lenders want to invest in an economy that is not poised to perform?
My answer is that a market of more than 170 million people does not shrink when its growth rate does. That gives Bangladesh a bargaining position few countries with such a forecast have. The evidence from other countries supports four reasons.
Firstly, investors follow the size of a market more than its growth rate. In 2016, in the middle of a deep recession, Brazil still received about $78.9bn of foreign direct investment, nearly half of the inflows to Latin America.
The proposals for Bangladesh follow the same logic. The Invest Bangladesh pipeline is led by renewable energy and information technology, and the Chinese proposals include the Dhaka-Chittagong highway and waste-to-energy plants. These serve the domestic market.
By my own arithmetic, even 3.2% growth on an economy of about $470bn adds around $15bn of output in a year.
Secondly, governments compete for influence in large and well-placed countries. In 2015, Indonesia awarded the Jakarta-Bandung high-speed rail to China over Japan after China agreed to build it without an Indonesian government guarantee, while Japan had offered a loan at 0.1% interest.
Bangladesh sits in the same contest, as China, Japan, the Netherlands, and the United States all seek a role in its ports, rivers, and energy.
China and the Netherlands have both offered support on the Teesta feasibility study. Japan's answer is Matarbari, and its diplomats cite the Southern Economic Corridor linking Thailand, Cambodia, and Vietnam as the model.
Thirdly, supply chains are moving out of China. Vietnam drew a record $25.35bn in foreign direct investment in 2024 as manufacturers diversified, helped by its trade agreements and lower labour costs.
The agreement with Japan, China's zero-tariff treatment of Bangladeshi goods, and the planned agreement with South Korea give Bangladesh a similar platform.
Fourthly, multilateral lenders do not walk away from large borrowers. In 2024, Egypt secured an IMF program of $8 billion, a World Bank package of $6 billion and EU support of €7.4bn. In Nigeria, where I also work, the World Bank approved about $9.35bn between June 2023 and May 2026, after the government removed the petrol subsidy and unified the exchange rate. In my reading, the financing in both countries was tied to reform.
However, most of this interest is still a promise, not an investment.
Ashik Chowdhury, who now chairs Invest Bangladesh, said in June that the Chinese company’s proposals had not been verified. Of the $1.3bn pipeline his agency reported in September, only a little over $400m had reached the decision or implementation stage.
UNCTAD puts total foreign direct investment into Bangladesh in 2025 at $1.8bn, and the World Bank's own commitment fell to $820m in FY26, its lowest. Interest lapses if the government does not convert it.
To secure these investments, the Ministry of Finance should conclude the new IMF program quickly, as finance ministry officials themselves describe an active program as a seal of approval that unlocks other financing.
In return, the government should accept the IMF’s conditions on raising tax revenue. Bangladesh collects only 8.3% of GDP in tax, among the lowest ratios in the world. The IMF mission discussed measures to raise that ratio as early as July, and no lender will drop the condition.
Each G2G partnership also needs a single owner in government and a published timetable, as the published accounts of the declaration with China give no cost or date for Mongla, Chittagong, or Teesta.
Invest Bangladesh should publish a quarterly tracker of every proposal and its stage. The government should also hold to the five-year tax outlook it presented to Chinese investors.
Size is the reason an economy like Bangladesh always has room to turn around. The governments and lenders now showing interest are betting on the market, not on this year's growth rate.
However, the turnaround will not happen unless the government removes the constraints the World Bank has named: Gas and electricity shortages that disrupt industry, non-performing loans that reached 33.2% in June, and weak revenue collection.
The Matarbari plan also depends on relations with India, as the Maitri Bridge over the Feni river, the link to Tripura, is not operating.
The government will keep its bargaining position only if it turns this interest into signed investment before the investors look elsewhere.
Md Rubaiyath Sarwar is Managing Director of Innovision Consulting and Trustee at Panam Institute, an Economic Think-Tank .
