The government is facing mounting challenges in securing the next instalments of the International Monetary Fund (IMF) loan, as critical reform conditions remain unmet.
Chief among the concerns are the failure to allow the dollar exchange rate to float freely, sluggish growth in revenue collection, persistent subsidies, and inadequate improvements in the banking sector.
Officials familiar with the matter say that although the forthcoming fourth and fifth instalments of the IMF loan are not sizeable, they carry immense symbolic weight.
With the 2025–26 fiscal budget looming, ensuring continued engagement with the IMF sends a vital message to the global financial community.
A disruption in this process may trigger reluctance from other lenders such as the World Bank and the Asian Development Bank.
Dr Zahid Hussain, former lead economist at the World Bank's Dhaka office, said recent IMF mission to Bangladesh did not confirm any commitment to disburse the next instalments in June, nor was there any agreement signed. While the door for negotiation remains open, he cautioned that Bangladesh has yet to meet all the conditions tied to the programme, leaving the disbursement of the two tranches hanging in uncertainty.
At present, Finance Adviser Dr Salehuddin Ahmed and Bangladesh Bank Governor Dr Ahsan H Mansur are attending the Spring Meetings of the IMF and World Bank, which began on Monday and will continue until Saturday.
It is hoped that substantive discussions during the meetings will help resolve the impasse.
“The amounts may be modest, but these instalments are crucial,” Dr Hussain added.
“The budget’s implementation will require liquid cash support from the World Bank and ADB. Should the IMF delay or cancel its tranches, these institutions may also pull back.”
He identified two principal stumbling blocks: the lack of a fully market-determined exchange rate and the failure to meet revenue targets.
“The time has come for Bangladesh Bank to be more flexible,” said the economist.
“The dollar supply has improved, imports are subdued, and both oil and dollar prices have declined globally. If not now, then when?”
On revenue targets, he urged the IMF to take a more pragmatic approach, stating that the current targets may be unrealistic under present circumstances.
When asked whether there is any uncertainty surrounding the IMF loan, a senior official at Bangladesh Bank replied: “We remain optimistic. Both the economic adviser and the governor are currently in Washington. A high-level meeting on this issue is expected during the IMF meetings.”
However, he admitted that “some uncertainty remains,” as no decision was made during the recent staff-level talks.
In early 2023, Bangladesh signed a $4.7 billion loan agreement with the IMF. The first instalment of $476.2 million was released in February that year, followed by $682 million in December and $1.15 billion in June 2024 as the third tranche.
However, failure to fulfil key conditions—including implementing a market-based exchange rate, meeting net international reserve targets, and achieving agreed tax reforms—has led to delays in the release of the fourth instalment.
Following the change in government, an IMF mission visited Dhaka in December 2024.
The interim administration had expressed hopes of receiving the fourth tranche between February and March 2025. At the time, Salehuddin Ahmed suggested that Bangladesh could receive up to $1.1 billion if the IMF board gave its approval.
The disbursement was expected by 10 February, subject to four conditions: boosting tax revenue to manage external pressure, tightening monetary policy to curb inflation, allowing a flexible exchange rate, and implementing climate-resilient growth policies.
Bangladesh fell short on the exchange rate and revenue collection fronts.
In February, Salehuddin hinted that the delayed fourth tranche might be combined with the fifth and released together in June.
From 6 to 17 April, an IMF delegation led by Chris Papageorgiou, head of the Development Macroeconomics division, reviewed progress on the programme.
No conclusive decision was made, and discussions are expected to continue.
The IMF has acknowledged improvements in foreign currency reserves and exchange rate stability, but maintains that further flexibility would enhance economic resilience.
Highlighting Bangladesh’s low tax-to-GDP ratio, the IMF has urged comprehensive reform of the tax system, calling for clearer distinctions between policy and administration, reduction in exemptions, simplification of tax codes, and a sustainable revenue roadmap.
These views have been echoed by the Centre for Policy Dialogue (CPD). Speaking at a recent event, CPD Research Director Khondaker Golam Moazzem warned that without higher tax revenues, it would be difficult for the government to fund subsidies, diversify exports, or develop a skilled workforce.
