IMF loan delay puts pressure on Bangladesh economy

The International Monetary Fund (IMF) has reportedly declined to release the next tranche of Bangladesh’s ongoing loan programme by June, citing the country’s failure to implement agreed reforms in the revenue and banking sectors.

Instead, the IMF has proposed starting discussions on a new loan programme with additional conditions, according to officials familiar with the matter.

The development is expected to create pressure not only on short-term foreign financing flows but also on Bangladesh’s broader economic management and reform agenda.

The decision comes at a time when Bangladesh is already facing rising fuel import costs, pressure on foreign exchange reserves, and heightened economic expectations following the national election.

A member of Bangladesh’s delegation attending the IMF-World Bank Spring Meetings in Washington DC confirmed the matter. The delegation is being led by Finance Minister Amir Khasru Mahmud Chowdhury.

According to the official, the IMF made it clear during meetings over the past two days that it would not disburse the expected $1.3 billion tranche in June under the existing $5.5 billion programme.

Bangladesh is still due to receive a total of $1.86 billion under the current programme, which is scheduled to expire next January.

A previous tranche expected in December had also been delayed pending discussions with the newly elected government. Bangladesh had hoped to receive both the December and June instalments together, but the IMF’s latest position has made that prospect uncertain.

Key reasons behind IMF concerns

The IMF’s objections reportedly center on four major issues: weak revenue collection, lack of discipline in the banking sector, slow progress in reducing fuel subsidies, and failure to introduce a market-based exchange rate.

Krishna Srinivasan, director of the IMF’s Asia and Pacific Department, said Bangladesh’s revenue collection has declined further over the last three years, creating a major obstacle to meeting the country’s economic needs. He emphasised the need for substantial reforms in the revenue sector.

Although the loan agreement called for reducing tax exemptions to raise revenue, Bangladesh’s tax-to-GDP ratio has instead fallen, increasing pressure on development spending and debt management.

Concerns over banking sector

Failure to carry out expected banking reforms is also a major source of dissatisfaction for the IMF.

Analysts say that instead of strengthening financial discipline, some policy measures have increased risks in the sector, weakening confidence among international development partners.

Subsidies and exchange rate issues

Progress in withdrawing energy subsidies and adopting a market-based exchange rate has also slowed significantly.

Although fuel prices were adjusted several times in the past, recent reforms have stalled. The IMF reportedly believes this reflects political and policy hesitation in implementing promised measures.

Rising external pressure

Higher global energy prices have increased Bangladesh’s import costs, adding further strain on public finances.

In this context, Bangladesh has been holding talks with international partners for additional financing, though securing funds on favorable terms is becoming increasingly difficult.

Possibility of a new programme

Economists believe the IMF is now more interested in replacing the current programme with a new agreement carrying stricter conditions.

Executive Director of Centre for Policy Dialogue (CPD), Fahmida Khatun, said implementation of IMF conditions had effectively stalled during the interim government period.

She said the government now faces two choices: fully comply with IMF conditions and continue the programme, or reject the terms and withdraw from the agreement.