Bangladesh’s economic growth may slow to 3.5 per cent in fiscal year 2026-27 and fall below 3 per cent over the medium term unless the country makes decisive reforms to improve revenue mobilisation, create fiscal space and resolve banking sector weaknesses, the International Monetary Fund (IMF) said.
An IMF staff team led by Ivo Krznar visited Dhaka from 12 to 16 July following a request from the government for a new Fund-supported economic reform programme. The mission reviewed recent economic and financial developments and discussed the authorities’ reform priorities.
At the end of the visit, the IMF said Bangladesh was facing significant fiscal, financial sector and inflation challenges, with these pressures further intensified by the war in the Middle East.
Higher global commodity prices and supply disruptions have increased import costs and subsidy requirements, renewing inflationary pressures and narrowing the government’s already limited fiscal space, according to the Fund.
The higher import burden has also put pressure on the external sector, although strong remittance inflows have provided support. Meanwhile, stress in the banking sector remains elevated, creating additional risks for economic stability.
IMF mission chief Ivo Krznar said discussions with the government were constructive and focused on recent economic developments, policy priorities, reform plans and capacity-building requirements.
He said the two sides would discuss the possible parameters of a new IMF arrangement, including its size and reform commitments, in the coming months.
The IMF said the policy priorities identified during its 2025 Article IV consultation remain central to improving Bangladesh’s economic outlook.
The Fund called for stronger revenue mobilisation and subsidy rationalisation to create room for higher social and development spending. It said well-targeted social support would be needed to protect vulnerable households from the impact of revenue reforms.
The IMF also recommended maintaining tight monetary and prudent fiscal policies to contain inflation and rebuild foreign exchange reserves.
It said consistent implementation of the crawling peg exchange rate regime introduced in 2025 would help improve exchange rate flexibility and safeguard external stability.
The Fund stressed that banking sector restructuring should be based on a credible and comprehensive strategy. A well-managed cleanup of the sector would be necessary to restore macro-financial stability and support private investment, it said.
The IMF projected that Bangladesh’s growth would slow to 3.5 per cent in FY2027 and weaken further below 3 per cent over the medium term if reforms to strengthen revenue collection, expand fiscal space and address banking sector vulnerabilities are not implemented.
The Fund said risks to the outlook remain tilted to the downside, with banking sector weaknesses, fiscal pressures and external challenges potentially reinforcing each other and further weighing on growth.
The IMF team thanked the Bangladeshi authorities and other stakeholders for their cooperation and said it would continue engagement on the possible new programme.
