Dhaka: Bangladesh is moving toward a new loan program worth $4 to $4.5 billion with the International Monetary Fund (IMF), dropping the lender’s ongoing multi-billion dollar credit facility, according to the Ministry of Finance. The development was confirmed in a press release issued following a high-level virtual meeting held last Thursday between government officials, led by Finance Minister Amir Khosru Mahmud Chowdhury, and IMF Deputy Managing Director Nigel Clarke.
According to United News of Bangladesh, Central Bank Governor Md. Mostaqur Rahman, Finance Secretary Md. Khairuzzaman Mozumder, and other top officials were present at the meeting. The Ministry of Finance stated that discussions on initiating a new three-year program with the Washington-based lender are underway. The upcoming program will incorporate realistic structural reforms to be implemented in a phased manner. IMF DMD Nigel Clarke welcomed the government’s fresh initiative.
Finance Minister Amir Khosru explained that the ongoing program was adopted under a different economic and policy environment, with subsequent domestic shifts and global uncertainties creating challenges in implementing some of the rigid reform targets. The Finance Minister emphasized that the government wants to implement practical reforms aligned with the country’s ground realities.
Ministry officials acknowledged that Bangladesh has fallen behind on several critical benchmarks stipulated under the existing arrangement, with slow progress in areas such as boosting revenue collection, executing VAT reforms, and modernizing the tax administration. The central bank has also not fully transitioned to a market-driven foreign exchange rate, and the government has delayed reducing energy and electricity subsidies.
The IMF has expressed dissatisfaction with the lack of progress in the banking sector, particularly regarding weak bank restructuring, non-performing loan management, and the delayed Bank Resolution Act. With less than a year remaining for the current loan tenure, meeting these tough targets within the remaining timeframe is unlikely. A new program will provide the government more time for structural adjustments.
Following the IMF’s initial approval, the Finance Ministry is seeking formal policy approval from the highest tier of the government. Once approved, Dhaka will send an official letter to the IMF detailing the grounds for exiting the current framework and initiating the new program. An IMF mission is expected to visit Dhaka in July or August to negotiate the new package’s terms and conditions.
Commenting on the development, Dr. Zahid Hussain, former Lead Economist of the World Bank’s Dhaka office, said the government is “buying time” through this transition. He noted that the reforms Bangladesh failed to deliver under the current framework would resurface in the new one, as these changes are necessary for the country’s economic health. Dr. Hussain added that it remains to be seen what additional benefits the new program will offer.