The International Monetary Fund (IMF) has cautioned Bangladesh against providing unsecured liquidity support to weak banks, warning that such interventions could deepen systemic risk and undermine confidence in the financial system. The Fund also urged the authorities to complete the exchange-rate reform agenda in a consistent and credible manner, arguing that partial implementation has weakened policy transmission and distorted market signals.
The remarks were made following the conclusion of the IMF’s Article IV consultation with Bangladesh and form part of its assessment of progress under the country’s agreed financing programme of USD 5.5 billion. The Fund acknowledged the efforts of the interim government to stabilise the economy in the aftermath of the 2024 mass uprising and in the run-up to national elections, noting that political uncertainty has complicated macroeconomic management at a delicate juncture.
At the core of the IMF’s recommendations is the need for a credible, internationally aligned strategy to restore financial stability. The Fund said bank sector reform must be anchored in a transparent assessment of capital shortfalls, a clear framework for fiscal backstopping, and legally robust plans for bank restructuring and resolution. Without such foundations, emergency liquidity support risks propping up insolvent institutions, weakening incentives for reform and increasing contingent liabilities for the state.
The IMF placed particular emphasis on state-owned banks, calling for comprehensive asset-quality reviews, the expansion of risk-based supervision, and stronger governance standards. It argued that balance-sheet transparency and tighter oversight are essential to restore depositor confidence and reduce the accumulation of non-performing assets, which continue to weigh on the banking system.
On macroeconomic policy, the Fund advised maintaining a tight policy mix to rebuild foreign-exchange reserves and curb inflation. It urged the authorities to complete the transition to a more flexible exchange-rate regime and to avoid ad hoc interventions that fragment the market. Monetary policy, the IMF said, should remain restrictive until inflation is firmly on a downward trajectory.
Inflation and Growth Outlook (IMF projections)
| Fiscal Year | Headline Inflation (%) | Real GDP Growth (%) |
|---|---|---|
| 2024–25 | 8.2 (October reading) | — |
| 2025–26 | 8.9 (full-year average) | 4.7 |
| 2027 | ~6.0 (target trajectory) | ~6.0 (medium term) |
Despite some easing from double-digit levels earlier in 2024–25, inflation remains elevated. The IMF projects that price pressures will persist into 2025–26 before gradually declining towards around 6 per cent by 2027, provided policy discipline is sustained. Growth is expected to recover slowly, reaching about 4.7 per cent in 2025–26 and strengthening towards 6 per cent over the medium term as reforms take hold.
The Fund warned that weak tax mobilisation and persistent financial-sector vulnerabilities are amplifying macro-financial risks. Delays in implementing bold fiscal and financial reforms could create significant downside risks to stability and growth. To bolster resilience, the IMF recommended rationalising subsidies, prioritising growth-enhancing public investment, strengthening social protection, and improving public financial management and investment governance to support inclusive development.
Overall, the IMF concluded that incomplete exchange-rate reform, elevated inflation, banking-sector fragilities and subdued revenue performance continue to weigh on Bangladesh’s macroeconomic stability and growth prospects. A coherent reform push, it said, is essential to restore confidence, safeguard financial stability and place the economy on a more durable growth path.