Bangladesh has been a member of the International Monetary Fund (IMF) since 1972. It has taken about 12 loans. IMF loan interest rates are low, but the terms are strict. IMF loans are always conditional on reforms. Countries typically turn to the IMF for loans when they are under economic pressure.
Governments are required to undertake various reforms and amend the laws as per the IMF’s conditions. If the reforms are not implemented successfully, the IMF can halt the disbursement of loan installments. Bangladesh’s IMF loan programmeme plays a significant role in supporting economic stability, rebuilding foreign exchange reserves and advancing key economic reforms.
The conditions for the loan include IMF-supported adjustment programmemes for improving current account balances, increasing international reserves, lowering inflation, and raising growth. Conditionality helps countries solve balance of payments problems without resorting to measures that harm national or international prosperity. In addition, the measures aim to safeguard IMF resources by ensuring that the country’s finances will be strong enough to repay the loan.
There is a perception that the IMF loan programme conditionality is likely to place substantive constraints on the authorities’ actions and use of funds. The anti-donor lobby believe the programmes generally involve economic and social tradeoffs. A perception may be created that conditionality does not take proper account of a country’s circumstances, including its economic priorities, political conditions, culture, and traditions.
Bangladesh is again negotiating a loan programme for US$4.5 billion to be disbursed in six instalments from December 2026 through December 2029. The new loan programme will include increasing revenue collection, VAT reform, reducing tax exemptions, and modernising tax administration, fully market-based exchange rates, ensuring good governance in the banking sector, restructuring weak banks, and progress in reducing non-performing loans. The IMF loan also proposed other criteria such as enhanced debt management, more fiscal transparency, stronger cash management, and greater independence for the central bank. The last loan agreement was a $ 4.7 billion IMF loan agreement signed in early 2023 after negotiations began in 2022. The loan agreement was signed amid economic strain triggered by the COVID pandemic and the Russia-Ukraine war. The amount was later increased to $5.5 billion during the interim government.
Bangladesh received its first $476.3 million instalment in February 2023 and has since received five instalments totalling $3.64 billion. The IMF withheld a tranche last December 2025 during the interim administration, saying further disbursements will follow discussions with an elected government. IMF was not happy with the progress of reforms. After the BNP government took office in February, negotiations resumed, with Dhaka proposing to exit the previous arrangement and seek a new programme.
In the 2025 Article IV consultation in January, the IMF identified persistently low fiscal revenues, weaknesses in the banking sector, stubbornly high inflation and slippages in exchange rate reform as major challenges for Bangladesh. An Article IV consultation is a regular (usually annual) health check and bilateral surveillance review that the IMF conducts with each of its member countries under Article IV of its Articles of Agreement.
The report further observed that Bangladesh needs stronger revenue mobilisation and subsidy rationalisation to create fiscal space to increase priority social and development spending. Well-targeted social support can help mitigate the impact of revenue reforms on vulnerable households. Tight monetary and prudent fiscal policies should be maintained to reduce inflation and rebuild foreign exchange reserves. Consistent implementation of the crawling peg regime adopted in 2025 would help enhance exchange rate flexibility and safeguard external stability.
The most important condition of the IMF loan is the elimination of subsidies on fuel, fertiliser, electricity and gas. A World Bank study published in June found that the top 20 percent of farming landholders receive about half of all fertiliser subsidies, while the bottom 40 percent get only 15 percent. The subsidies may shift the funds away from volume-based input subsidies toward direct income support or cash transfers designed specifically for smallholders.
IMF also raised questions about how the government would finance higher salaries for public servants. On 4th October 2026, the finance minister said Bangladesh ‘scrapped’ the IMF loan programme and Bangladesh will no longer accept IMF conditions.
During the interim government, a report published on 4 March 2025 said that Bangladesh Bank Governor Ahsan H Mansur, a former senior official of the IMF, stressed that the country requires the right policies rather than ‘begging for foreign funds’. Bangladesh does not need funds from IMF if it can mobilise enough domestic resources. Earlier, the finance minister in 2022 also announced that Bangladesh don’t need a loan from the IMF.
Ex-finance adviser Dr Salahuddin Ahmed said on 30th April 2025 that “We are no longer IMF-World Bank-dependent. We won’t take a loan accepting all conditions. If the IMF doesn’t agree to pay the budget-support credit, we will prepare the budget on our own.” In 2022, the then finance minister said if any loan is taken from the IMF, Bangladesh will never accept any condition that will go against the interest of the country. But his government has agreed to a conditional loan after such a remark.
The PM’s Adviser Prof Rashed Titumir said recently that Bangladesh expects to move ahead with IMF financing and economic reforms, as the lender’s conditions are largely consistent with the priorities outlined in the BNP government’s election manifesto and planned policy initiatives. He said implementing the reform agenda would strengthen the economy’s capacity to sustain growth. We are proceeding through the existing mechanisms to address the conditions, implementing each step efficiently and without unnecessary delays.
PM’s Adviser further said the government is working through the established process to address the IMF’s requirements while implementing its own reform agenda. The adviser’s remarks come as Bangladesh continues discussions with the IMF and other development partners over financing and economic support amid persistent inflationary pressure and wider economic challenges.
Interestingly, just about two weeks after saying that the BNP government did not want to ‘depend’ on IMF financing tied to conditions, the FM Amir Khosru Mahmud Chowdhury has softened his tone and said that Bangladesh will have to fulfil certain conditions to receive new loan assistance from the IMF. He confirmed that more talks would be needed to determine the conditions under the programme and how they would be met. Some issues would be resolved through mutual agreement between the two sides, he added. The FM said the IMF had observations on several issues. Bangladesh agreed with the IMF’s observations on these matters, and many of the issues had already been addressed, he added.
For many years, our Finance Ministers have been vocal against loan programme and, at the end of the day, agreed to the terms of the programme but try to back out of the commitments for reforms. Time and again, Bangladesh ‘successfully’ avoided the pressure for reforms from donor agencies. This time, the loan programme will have time-bound conditions for reform. Finally, the IMF’s conditions are advisory but not mandatory. The approval is a criterion for loans from the World Bank and the Asian Development Bank.
The views expressed in this article are solely those of the author
The writer is the CEO, Bangla Chemical & Legal Economist. E-mail: [email protected]
