Bangladesh's Growth Could Fall 

The International Monetary Fund (IMF) has warned that Bangladesh's medium-term economic growth could fall below 3 per cent unless the government swiftly implements reforms to boost revenue collection, rationalise subsidies and address banking sector weaknesses.

The Washington-based lender also said the ongoing conflict in the Middle East has created fresh pressures on inflation, government revenues and the country's external sector.

An IMF mission, led by Ivo Krznar, visited Dhaka from July 12 to 16 at the request of the Bangladesh government. During the visit, the delegation held discussions with government officials on recent macroeconomic and financial developments, the country's reform agenda and a possible new IMF-supported programme.

In a statement issued on Thursday following the visit, Krznar said the fact-finding mission helped the IMF gain a detailed understanding of Bangladesh's policy plans, economic reform priorities and capacity development needs.
He said discussions on the size of a potential new programme, the amount of financial support and the associated reform commitments would continue over the coming months.

According to the IMF's assessment, Bangladesh continues to face significant challenges related to revenue mobilisation, the financial sector and inflation. These challenges have been further intensified by the ongoing conflict in the Middle East.

The IMF noted that rising global commodity prices and disruptions in supply chains have renewed inflationary pressures. At the same time, higher subsidy expenditures have placed additional strain on the country's already limited fiscal space and revenue capacity.

The statement also said the country's external sector is under pressure due to rising import costs. Although remittance growth remains strong, elevated import bills continue to weigh on external balances. Meanwhile, stress in the banking sector remains high.

The IMF said this week's discussions were guided by the policy priorities identified in the 2025 Article IV Consultation. It stressed that substantially increasing revenue collection and rationalising subsidies are essential to create fiscal space for higher spending on social protection and development.

The Fund also recommended strengthening targeted social assistance programmes to protect vulnerable groups from the impact of revenue reforms.

To contain inflation and rebuild foreign exchange reserves, the IMF advised Bangladesh to maintain a tight monetary policy alongside prudent fiscal management. It also emphasised the consistent implementation of the crawling peg exchange rate regime introduced in 2025 to enhance exchange rate flexibility and preserve external stability.

On banking sector reforms, the IMF called for a credible and comprehensive strategy to restructure the banking system and address its vulnerabilities in an orderly manner. Such reforms, it said, would help restore macroeconomic and financial stability and revive investment.

Looking ahead, the IMF projects Bangladesh's economic growth to slow to 3.5 per cent in fiscal year 2027. It warned that without the necessary reforms to strengthen revenue mobilisation, create fiscal space and resolve banking sector weaknesses, medium-term growth could decline further to below 3 per cent.

According to the IMF, vulnerabilities in the banking sector, fiscal challenges and external risks could reinforce one another, increasing downside risks to Bangladesh's overall economic outlook.