Bangladesh, IMF agree on new realistic three-year reform programme
While the finance minister reiterated that the current administration remains fully committed to macroeconomic stability and structural overhauls, he explicitly noted that the existing IMF programme had been formulated under a completely different economic and policy context
Highlights
- Government plans to exit the existing IMF loan agreement signed under the previous government.
- Dhaka wants to negotiate a new $5 billion IMF credit package under revised conditions.
- Finance Minister Amir Khosru Mahmud Chowdhury discussed the issue with IMF Deputy Managing Director Nigel Clarke on 21 May.
- Government says some IMF reform conditions are difficult to implement under current economic and political realities.
- An IMF mission is expected to visit Dhaka in July or August to finalise the new framework.
The government has officially decided to opt out of the existing loan agreement signed between the International Monetary Fund (IMF) and the erstwhile Awami League administration, moving instead to negotiate a fresh $5 billion credit package under modified terms.
This major policy shift was confirmed during a high-profile virtual meeting held on 21 May, between a Bangladeshi delegation led by Finance and Planning Minister Amir Khosru Mahmud Chowdhury and an IMF team headed by its Deputy Managing Director Nigel Clarke.
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According to an official press release issued today (25 May) by the Ministry of Finance, the digital session focused on Bangladesh's macroeconomic stability, the progress of ongoing IMF programmes, and future institutional cooperation.
During the discussions, the finance minister recalled the fruitful talks held during the latest IMF-World Bank Annual Meetings in Washington DC, noting that the government had since reviewed the reform packages internally.
While the minister reiterated that the current administration remains fully committed to macroeconomic stability and structural overhauls, he explicitly noted that the existing IMF programme had been formulated under a completely different economic and policy context.
He explained that subsequent domestic developments, political economy considerations, and global uncertainties have created severe implementation challenges for certain structural reforms.
The minister emphasised that the government does not want to retreat from economic reforms entirely. Instead, the administration aims to execute a realistic, well-sequenced reform agenda that aligns closely with the ground realities of the country, the release added.
In light of these points, the virtual meeting focused heavily on launching a brand-new IMF credit facility under the newly elected government. The alternative framework proposes a realistic three-year timeline incorporating attainable, priority reforms structured around practical sequencing.
IMF's Nigel Clarke welcomed Bangladesh's updated reform initiatives and its proposal for a new facility, expressing hope for a continued close and constructive engagement between the lender and the state.
Both sides reached a consensus on the necessity of a realistic, implementation-focused loan package, agreeing to fast-track the preparatory activities.
Concurrently, high-level ministry sources revealed that the decision to exit the ongoing package stems from a prolonged gridlock over stringent conditionalities.
The global lender has been putting mounting pressure on Dhaka to implement a uniform 15% VAT rate, eliminate tax exemptions, and replace universal state subsidies on electricity and fertiliser with targeted cash transfers.
Furthermore, international development partners have expressed dissatisfaction with the new government's recent amendment to the bank resolution framework under the Bank Resolution Act, 2026, viewing it as a regressive step for transparency.
The finance minister has publicly asserted that as an elected government accountable to the public, the administration cannot comply with donor demands that run counter to public interest or the BNP government's election manifesto.
High-level financial bureaucrats maintain that an active IMF programme remains vital as an essential institutional seal of approval, which is critical to unlocking an estimated $3 billion to $4 billion in parallel annual budget assistance from the World Bank and the Asian Development Bank.
An IMF mission is expected to arrive in Dhaka this July or August to finalise the specific volume, timeline, and terms of the new alternative framework.
