Dhaka warns of IMF withdrawal if reform pressure mounts

Staff Reporter :

Bangladesh may consider withdrawing from the $4.7 billion loan programme with the International Monetary Fund (IMF) if further conditions are attached to the release of the remaining instalments, warned Anisuzzaman Chowdhury, Special Assistant to the Chief Adviser, during a budget seminar held on Saturday at the Bangladesh Agricultural Research Council in Dhaka’s Farmgate.

“Bangladesh will step away from the programme if the IMF imposes additional terms for releasing the next tranches.

Complying with all of the IMF’s conditions could weaken the economy,” Chowdhury stated, expressing growing concerns within the administration over the reform-linked disbursements required under the IMF agreement.

The remarks come at a pivotal moment, as Bangladesh prepares for its graduation from the Least Developed Country (LDC) category in 2026-a transition that demands increased economic resilience and competitiveness.

The seminar, which drew participation from leading agricultural economists, also underscored the need for a more targeted and supportive agricultural budget.

Key recommendations included reducing VAT on raw materials used in poultry feed, improving farmers’ access to credit, and offering strategic incentives to boost productivity and food security.

Bangladesh entered into the IMF loan agreement on 30 January 2023 in response to mounting macroeconomic challenges, including a steep decline in foreign currency reserves, surging inflation, and a widening balance of payments deficit-pressures compounded by the global ramifications of the Ukraine war and post-pandemic supply chain disruptions.

The IMF package, comprising the Extended Credit Facility (ECF), Extended Fund Facility (EFF), and Resilience and Sustainability Facility (RSF), was designed to stabilise the economy, drive reforms in tax and energy pricing, and encourage climate-resilient investments.

To date, Bangladesh has received three disbursements under the programme: $476.27 million in February 2023, $682 million in December 2023, and a more substantial $1.15 billion in June 2024.

However, uncertainty surrounds the release of the fourth and fifth instalments, due in late 2024 and 2025 respectively, as the country struggles to meet the IMF’s reform benchmarks.

These include enhancing revenue mobilisation, implementing energy pricing reforms, adopting a flexible exchange rate regime, and improving governance in the financial sector.

Government officials have raised concerns that strict adherence to IMF conditions could adversely affect vulnerable sectors and hamper growth, particularly amid persistently high inflation and growing public frustration.

While the IMF continues to emphasise the importance of structural reforms for long-term economic stability, the government appears to be re-evaluating the costs and benefits of continued participation in the programme.

With three instalments disbursed and three more pending before the agreement concludes in 2026, Bangladesh’s recent comments suggest a critical juncture in its engagement with the IMF and its broader economic strategy.