In January 2023, the International Monetary Fund approved a $4.7 billion loan programme for Bangladesh — the largest IMF engagement with the country in its history and the first in thirteen years. The programme was structured across 42 months under three facilities: the Extended Credit Facility and Extended Fund Facility (ECF/EFF), providing $3.3 billion for macroeconomic stabilisation and structural reform, and the Resilience and Sustainability Facility (RSF), providing $1.4 billion for climate-related investment. Bangladesh was the first Asian country to access the newly created RSF. The IMF framed the programme not as a bailout — the term applied to Sri Lanka and Pakistan in their respective crisis episodes — but as a precautionary stabilisation arrangement: a country choosing to lock in structural reforms and external support before a balance of payments situation deteriorated further, rather than after.
The context that drove Bangladesh to the IMF in 2023 was real and well-documented. Foreign exchange reserves had fallen from a peak of approximately $48 billion in August 2021 to below $25 billion by late 2022 and were still declining. The taka had depreciated sharply, falling from 86 taka per US dollar in mid-2022 to levels exceeding 110 taka by the time the programme was agreed. Inflation had reached levels not seen in over a decade, driven by a combination of global commodity price increases, energy import costs, and domestic monetary policy that had kept interest rates artificially suppressed below the inflation rate for an extended period. Non-performing loans in the banking sector — already elevated before the external pressure emerged — were rising further, with the gross NPL ratio reaching 9 percent of total loans by December 2023, a figure that the World Bank noted understated underlying stress because of weak classification standards and regulatory forbearance. Bangladesh's revenue-to-GDP ratio, at 8.2 percent, was among the lowest in the world, severely constraining the government's capacity to fund development expenditure without borrowing.
What the IMF Programme Actually Requires
The conditions attached to Bangladesh's IMF programme are more extensive than those associated with typical balance of payments support. The programme imposes performance criteria — quantitative targets on net international reserves, the primary budget balance, and reserve money — that must be met at regular review points for disbursements to continue. It also includes a substantial set of structural benchmarks: specific institutional reforms that must be implemented on a defined timeline.
The most consequential reform conditions fall into three clusters. The first concerns the exchange rate. Bangladesh had operated a de facto multiple exchange rate regime from September 2022, with different rates applying to different transaction types — a system that the IMF identified as actively discouraging export receipt repatriation and remittance inflows through formal channels. In May 2024, Bangladesh Bank realigned the exchange rate and introduced a crawling peg regime, eliminating the multiple rate system as a condition of the second review. The second cluster concerns revenue mobilisation. Bangladesh's tax-to-GDP ratio — which fell further to 6.8 percent by FY2025 — is structurally inadequate to fund the public investment and social spending that sustainable growth requires. The IMF programme requires tax policy and administrative measures to augment revenues by 0.5 percent of GDP per fiscal year, alongside development of a medium- and long-term revenue strategy. The third cluster concerns the banking sector. The IMF required Bangladesh Bank to tighten the NPL classification standard from 270 days of delinquency to 90 days — aligning Bangladesh with international norms — a reform that, when applied, would substantially increase the reported NPL ratio and make the true extent of banking sector stress visible to regulators, investors, and depositors.
The Numbers Since: Growth, Reserves, and the Banking Crisis Revealed
The economic trajectory since the IMF programme was approved has been shaped by a convergence of the programme's reform conditions, the political upheaval of July-August 2024 — when mass student protests against quota reforms led to the resignation of Prime Minister Sheikh Hasina and the installation of an interim government under Nobel laureate Muhammad Yunus — and the structural vulnerabilities that pre-existed both. Real GDP growth decelerated from an average of 6.6 percent over the pre-pandemic decade to 5.8 percent in FY2023, 4.2 percent in FY2024, and 3.7 percent in FY2025 according to IMF data from its November 2025 Article IV consultation — reflecting the combined effects of production disruptions during the uprising, tighter monetary and fiscal policy, and sustained external pressure.
Gross foreign exchange reserves, which had fallen to below $20 billion for several months in 2024, began recovering after the May 2024 exchange rate reform, reaching $20.4 billion in March 2025. Headline inflation fell from double-digit levels in early FY2025 to 8.2 percent year-on-year in October 2025 — still elevated, but trending downward. Remittances provided a critical stabilising force: during July-November FY2026, remittance inflows reached $13.04 billion, a year-on-year increase of over 17.1 percent. The current account balance achieved a very slight surplus in FY2025 — the first in eight years — as remittances and import compression combined to close the persistent deficit.
The banking sector picture became significantly worse as NPL classification standards improved. NPLs reached $28.57 billion by December 2024, up from $12.8 billion in September 2022 — not primarily because loan quality deteriorated sharply in that two-year period, but because previous accounting standards had allowed banks to conceal distressed loans through repeated rescheduling. By September 2025, the NPL ratio reached 35.73 percent of total disbursed loans — with six state-owned banks averaging 42.8 percent. The IMF's tighter classification standard, which had been scheduled to take effect on April 1, 2025, was postponed under pressure from the banking sector, raising questions about reform implementation timelines. The fourth loan tranche, which had been expected in early 2025, was delayed by the IMF pending additional progress on revenue reforms.
The Public Debt Question: How Much Is Too Much?
Bangladesh's public debt position is one of the more discussed aspects of the IMF programme, partly because the numbers look superficially reassuring — total public debt stood at an estimated 36.8 percent of GDP in FY2024, well below the standard 60 percent threshold applied to developing economies — and partly because the headline figure conceals important details about the composition and trajectory of that debt.
Bangladesh's domestic debt, which comprises approximately 57 percent of total public debt, is largely held in National Savings Certificates (NSCs) — instruments with above-market interest rates that have historically been offered to households as a savings vehicle. NSC interest payments represent a significant and growing claim on government revenue at a time when that revenue is already inadequate to fund development spending. The World Bank has consistently flagged the NSC system as an inefficient, regressive use of fiscal resources — regressive because NSC ownership is concentrated among middle-class urban savers rather than distributed across the population — and the IMF programme includes conditions requiring a rationalisation of NSC interest rates to market levels. External debt, including the HSBC-financed Bangabandhu satellite loan, Russia-financed power sector loans, and multilateral development bank lending, has been rising as a share of total debt. Debt service as a share of government revenue — a more practically relevant indicator than debt-to-GDP in an economy with a very low revenue base — is the metric that warrants closest attention.
The IMF's own June 2024 Debt Sustainability Analysis assessed Bangladesh at low risk of debt distress under the baseline scenario, but noted that contingent liabilities — particularly from the banking sector, where state-owned bank recapitalisation needs could generate significant fiscal claims — could worsen the assessment substantially. The World Bank's updated DSA was incorporating a substantial downward revision of export data for FY2023 and FY2024 that had been discovered during the post-Hasina government's reassessment of official statistics, a revision that could alter the picture meaningfully.
The Strategic Question: Invest or Consolidate?
The central tension in Bangladesh's economic strategy over the medium term is between two imperatives that pull in opposite directions. The IMF programme's fiscal conditionality — tightening the primary deficit, raising revenues, reducing subsidies — pushes toward consolidation, restraining public expenditure to rebuild macroeconomic buffers and restore external confidence. But Bangladesh's development agenda — building the infrastructure, human capital, and institutional capacity needed to graduate from Least Developed Country status by November 2026 without losing the trade preferences that have underpinned its export-oriented growth model — requires sustained public investment at a scale that consolidation alone cannot finance.
This is not a contradiction unique to Bangladesh: it is the central tension in IMF programme design for developing economies, and one that the fund's own research since 2020 has acknowledged more explicitly than in previous decades. The IMF's intellectual shift — recognising that low interest rates and high multipliers on infrastructure investment change the debt sustainability calculus — did not eliminate programme conditionality, but it did create more space for growth-oriented expenditure within programmes. Bangladesh's RSF component, which is explicitly designed to finance climate-resilient investment rather than consumption spending, reflects this evolution in IMF thinking.
The practical resolution requires Bangladesh to do something that has eluded it through multiple previous reform cycles: substantially raise its domestic revenue collection. A tax-to-GDP ratio of 6.8 percent is not a sustainable base for a country with Bangladesh's development ambitions and climate vulnerabilities. Every additional percentage point of GDP in revenue — which in Bangladesh's context represents roughly $4-5 billion annually at current GDP levels — reduces the borrowing required to fund essential public investment and improves the fiscal headroom to absorb external shocks. Private investment, which fell to 22.48 percent of GDP in FY2025, its lowest level in five years, also needs to recover — a recovery that depends on banking sector stability, inflation control, political consistency, and a regulatory environment that investors can plan around. The IMF programme's reform conditions are not ends in themselves but necessary preconditions for the investment climate that Bangladesh's growth model requires. The harder work is implementation — and that, in the end, is a political question as much as an economic one.
WinTK covers Bangladesh's economy, financial policy, and development strategy. For more reporting and analysis, visit our news section.
