The International Monetary Fund (IMF) has called on Bangladesh to prioritise fiscal sustainability and strengthen macro-financial stability, while accelerating wide-ranging structural reforms to boost governance, employment and economic diversification.
The recommendations came as the IMF Executive Board concluded its 2025 Article IV Consultation with Bangladesh on January 26 in Washington, DC, with the authorities agreeing to the publication of the consultation report.
The IMF said Bangladesh’s economy, which has slowed in recent years, is expected to recover gradually, with GDP growth projected to rise to 4.7 percent in both FY26 and FY27, before accelerating to around 6 percent over the medium term, provided critical reforms are implemented.
Economic growth decelerated to 3.7 percent in FY25, down from 4.2 percent in FY24 and 5.8 percent in FY23, reflecting production disruptions during the 2024 uprising, tighter policy conditions, and subdued investment. Inflation, although easing from double-digit levels, remained elevated at 8.2 percent year-on-year in October.
The IMF noted that weak tax revenue mobilisation and vulnerabilities in the financial sector continue to pose serious risks to macroeconomic stability. The tax-to-GDP ratio fell sharply in FY25, while fiscal pressures were partly contained through lower capital and social spending. Meanwhile, foreign exchange reserves have shown signs of recovery, supported by improvements in the current account balance.
Looking ahead, the IMF warned that the economic outlook is subject to significant downside risks, particularly from delays in implementing fiscal and financial reforms, policy reversals, and incomplete exchange rate adjustments. Inflation is projected to remain high at 8.9 percent in FY26 before easing to about 6 percent in FY27.
Executive Directors acknowledged the interim government’s efforts to stabilise the economy ahead of national elections but stressed the urgency of decisive and sustained reforms. They highlighted the need for ambitious tax policy changes, simplified tax administration, and stronger compliance mechanisms to enhance revenue collection.
The Board also emphasised rationalising subsidies, prioritising productive public investment, expanding social safety nets, and improving public financial management to support inclusive growth. Strengthening the financial performance of energy-related state-owned enterprises was identified as another key priority.
On financial sector reform, the IMF called for a comprehensive strategy aligned with international standards to address banking sector weaknesses. This should include asset quality reviews of systemic and state-owned banks, transparent estimates of capital shortfalls, strengthened supervision, and legally sound restructuring and resolution frameworks.
Directors further underscored the importance of maintaining a tight monetary stance to curb inflation and rebuild foreign exchange reserves. They stressed the need for full implementation of exchange rate reforms, greater flexibility in currency management, and caution against liquidity support to weak banks.
Beyond short-term stabilisation, the IMF said Bangladesh must pursue deep structural reforms to unlock long-term growth, especially as the country transitions from Least Developed Country (LDC) status. Priorities include improving governance, combating corruption, strengthening anti-money laundering frameworks, ensuring central bank independence, creating jobs for young people, and diversifying exports.
The IMF also encouraged continued progress under the Resilience and Sustainability Facility (RSF) arrangement to enhance climate resilience and mobilise climate finance, alongside efforts to strengthen economic data quality and institutional capacity.
Under Article IV of the IMF’s charter, member countries undergo regular consultations to assess economic conditions and policy frameworks, with findings presented to the Executive Board for review and guidance.
