The International Monetary Fund (IMF) urged Bangladesh to prioritise fiscal sustainability and urgent banking sector reforms, warning that weak revenue mobilisation and financial sector vulnerabilities pose growing risks to macroeconomic stability.
The IMF said Bangladesh’s economy is expected to recover gradually after a slowdown, with GDP growth projected at 4.7 per cent in FY26 and FY27, provided decisive fiscal and financial reforms are implemented.
The IMF executive board made these comments after completing its 2025 Article IV Consultation for Bangladesh in Washington on January 26, with the authorities consenting to publication of the staff report.
Bangladesh’s growth slowed to 3.7 per cent in FY25, down from 4.2 per cent in FY24 and 5.8 per cent in FY23, reflecting production disruptions during the 2024 uprising, a tighter policy stance and weak investment.
Inflation eased from double-digit levels but remained elevated at 8.2 per cent year on year in October, reports Bangladesh Sangbad Sangstha (BSS).
The fund flagged a sharp decline in the tax revenue-to-GDP ratio in FY25, noting that the fiscal deficit was contained largely due to under-execution of capital and social spending rather than stronger revenue performance.
Foreign exchange reserves have begun to rebuild, supported by an improving current account.
The executive directors stressed the need for ambitious fiscal reforms, including bold tax policy changes, simplification of the tax system and stronger tax administration and compliance to mobilise revenue. They also called for rationalising subsidies, prioritising growth-enhancing investment and strengthening public financial and investment management.
On the financial sector, the IMF highlighted the urgent need for a credible banking reform strategy aligned with international standards. Directors said reforms should include asset quality reviews of all systemic and state-owned banks, clear estimates of undercapitalisation, defined fiscal support and legally robust restructuring and resolution plans.
They warned that incomplete implementation of the new exchange rate framework, persistent banking sector weaknesses and elevated inflation continue to weigh on growth prospects.
The directors cautioned against unsecured liquidity injections into weak banks and stressed that monetary policy should remain tight until inflation is firmly on a downward path.
While acknowledging interim authorities’ efforts to stabilise the economy, the IMF said sustained policy commitment and early engagement by the next administration will be critical to restoring confidence, strengthening financial stability and supporting long-term growth as Bangladesh prepares to graduate from least developed country status.
