Bangladesh takes $4.5b loan plan to Bangkok after rejecting IMF terms

Bangladesh is preparing to negotiate a proposed $4.5 billion loan programme with the International Monetary Fund (IMF) in Bangkok, even after recently refusing further lending under conditions it considered too tough, putting revenue mobilisation, banking reforms and economic policy at the centre of a renewed financial negotiation.

Finance Minister Amir Khosru Mahmud Chowdhury is leading the Bangladesh delegation to the World Bank Group and IMF Annual Meetings, which begin on Monday and continue until October 18. Discussions on the sidelines are expected to focus on the proposed financing package, although its size, conditions and disbursement schedule remain undecided.

The apparent shift comes as the government seeks external financing without accepting reform obligations it considers difficult to implement. The challenge will be to reconcile Bangladesh's financing needs with the IMF's demands for credible structural reforms, particularly in tax collection, exchange rate management and the banking sector.

Finance Division officials said the Bangkok discussions would help determine the next steps in negotiations and the possible timing of an IMF mission to Dhaka towards the end of October.

Revenue mobilisation is expected to be a central issue, with the IMF seeking a detailed and realistic plan for increasing domestic collections in the next fiscal year.

Finance Division sources said the government would discuss how the National Board of Revenue (NBR) intends to raise additional revenue, which sectors would contribute and what measures would be implemented to meet the targets.

The emphasis is likely to be on delivery rather than projections alone. The authorities may need to demonstrate when specific measures will take effect, how much additional revenue they are expected to generate and whether the targets are achievable within the proposed timeframe.

The NBR's separation and broader revenue-administration reforms are also expected to feature prominently, alongside Bangladesh Bank's action plan and measures to strengthen the banking sector.

Exchange rate management, financial-sector restructuring and reductions in electricity and fertiliser subsidies could return to the negotiating table as unfinished commitments under the previous IMF programme.

These issues are particularly sensitive because reform conditions can have consequences for consumers, businesses, public spending and economic growth. The government will need to show that its proposed measures can strengthen public finances and financial stability without imposing excessive costs on vulnerable households.

Bangladesh's proposed new loan follows an extended engagement with the IMF under the previous administration.

The former Awami League government signed a $4.7 billion programme in January 2023. The interim government subsequently increased the programme to $5.5 billion.

Bangladesh has received around $3.8 billion in five instalments, according to figures provided by officials. The sixth instalment remained on hold after discussions were suspended in November last year.

Following the change of government, the IMF resumed engagement with the new administration. Dhaka subsequently sought a separate financing arrangement rather than continuing under the existing programme.

IMF Bangladesh mission chief Ivo Krznar confirmed the new government's request for a fresh arrangement in a statement issued on June 3.

The proposed $4.5 billion package remains subject to negotiations, technical assessment and approval by the IMF's executive board. Neither the amount nor the conditions can be considered final at this stage.

Banking reform is likely to be another major test of the government's negotiating position. Bangladesh faces persistent concerns about financial-sector governance, asset quality and the effective use of credit, making credible corrective measures important both for economic recovery and for international financing.

The IMF is expected to examine the government's reform plans and Bangladesh Bank's proposed actions, while exchange rate management will remain important for maintaining external stability and managing foreign-exchange pressures.

The government must also demonstrate that changes to revenue administration will translate into stronger tax compliance and higher collections, rather than merely reorganising institutions.

Failure to make measurable progress could complicate negotiations and constrain the government's ability to secure external financing on the scale it seeks.

The proposed loan comes amid persistent inflationary pressure, substantial debt-servicing obligations and uncertainty in the global economy. Additional financing could ease balance-of-payments pressures and help support macroeconomic stability, but the terms attached to any agreement will be critical.