Following discussions with Bangladesh authorities and continued engagement during the IMF and World Bank Spring Meetings, the International Monetary Fund (IMF) has reached a staff-level agreement with Bangladesh. This agreement pertains to the policies needed for completing the third and fourth reviews under various financial arrangements including the Extended Credit Facility (ECF), Extended Fund Facility (EFF), and Resilience and Sustainability Facility (RSF). According to Mr. Papageorgiou, IMF Mission Chief for Bangladesh, this agreement awaits approval from the IMF Executive Board and depends on prior actions related to tax revenue mobilization and exchange rate reforms.
Bangladesh has requested an augmentation of SDR 567.2 million (approximately US$762 million) in financial support under the ECF and EFF arrangements due to significant macroeconomic challenges. This would increase total assistance under these arrangements to SDR 3,035.65 million (about US$4.1 billion), along with concurrent RSF arrangements of SDR 1 billion (about US$1.3 billion). Upon completion of these reviews, SDR 983.8 million (around US$1.3 billion) will be available.
The country's GDP growth slowed to 3.3 percent year-on-year in early FY25 due to disruptions from a popular uprising but is expected to rebound in the second half of the fiscal year, reaching 3.8 percent overall. Inflation is declining from near double digits and is projected at around 8½ percent by FY25's end.
To address external financing gaps and reduce inflation, policy tightening is necessary according to Mr. Papageorgiou’s statement. Fiscal consolidation should involve implementing additional revenue measures while containing non-essential spending alongside monetary tightening.
Bangladesh’s low tax-to-GDP ratio highlights an urgent need for tax reforms aimed at creating a fairer system while boosting revenues sustainably through streamlining exemptions and enhancing compliance.
Addressing weak banks through swift action on new legal frameworks for bank restructuring is deemed essential for stability by Mr. Papageorgiou, who also emphasized governance improvements within Bangladesh Bank as crucial for long-term economic stability.
Enhancing climate change resilience remains vital for mitigating risks associated with macroeconomics or fiscal matters; thus investing in institutional capacity along with public spending efficiency will aid progress toward climate goals according to his statement.
The team expressed gratitude towards Bangladeshi authorities “for productive discussions” as well as “excellent collaboration.”