The International Monetary Fund (IMF) has decided not to release the next tranche of its ongoing loan programme for Bangladesh by June, citing insufficient progress in key structural reforms in revenue generation, banking, and energy sectors. Instead, the multilateral lender has proposed initiating discussions for a new loan arrangement with stricter conditionalities.
The development signals growing friction between Bangladesh and the IMF over the implementation of reform commitments under the USD 5.5 billion extended fund facility, raising fresh uncertainty over the country's external financing outlook at a time of rising global energy prices and external payment pressures.
No June Disbursement, Says IMF: A member of the Bangladeshi delegation attending the IMF-World Bank Spring Meetings in Washington, D.C. confirmed that the IMF has communicated its decision to withhold the expected June disbursement. "The IMF has clearly informed us that the next tranche will not be released in June," the official told The Daily Industry. "They believe Bangladesh has not met key reform benchmarks in fiscal policy, banking sector restructuring, subsidy rationalisation, and exchange rate flexibility." Bangladesh had been expecting around USD 1.3 billion by June, combining delayed disbursements from the previous review cycle and the upcoming tranche. That expectation now appears uncertain, with IMF officials indicating that even if discussions resume, funds may not be released before September.
Proposal for New Loan Programme: According to officials involved in the negotiations, the IMF has instead suggested launching a new loan programme with revised and more stringent conditions, rather than
continuing with the current arrangement in its present form. The existing USD 5.5 billion programme was originally signed in 2023 under the previous government and later expanded by USD 800 million. So far, Bangladesh has received approximately USD 3.64 billion under the programme, which is set to expire in January. An IMF official reportedly told the Bangladeshi delegation that a fresh framework would allow more realistic reform targets and stronger enforcement mechanisms, given the limited progress under the current structure. Reform Implementation Under Scrutiny: The IMF has raised concerns over Bangladesh's performance in three core areas: revenue mobilisation, banking sector reform, and market-based exchange rate management.
Officials said that tax-to-GDP ratios have continued to decline rather than improve, while banking sector restructuring efforts remain incomplete. Despite legislative initiatives, including a new Bank Resolution Act, the IMF has expressed concern over provisions allowing former owners of distressed banks to regain control. The Fund has also criticised the government's proposal to use budgetary resources to compensate depositors of troubled banks, arguing that deposit insurance mechanisms should be used instead.
Energy Subsidy and Exchange Rate Concerns: Another key area of disagreement is subsidy reform in the energy sector. Bangladesh had committed under the IMF programme to gradually eliminate gas and electricity subsidies by 2026. However, price adjustments have stalled over the past 18 months, raising concerns about fiscal sustainability.
The IMF has also reiterated that Bangladesh has not fully transitioned to a market-based exchange rate system, a core condition of the programme.
Global Energy Shock Adds Pressure: The negotiations are taking place against the backdrop of rising global oil prices following geopolitical tensions in the Middle East, including the ongoing conflict involving the United States, Israel, and Iran. The resulting increase in import costs has intensified Bangladesh's demand for external financing from multilateral lenders.
Bangladesh has reportedly sought additional financial assistance from the IMF, World Bank, and other development partners to manage rising energy import bills and external payment obligations.
However, the IMF's cautious stance has also prompted Dhaka to explore more flexible financing options with the World Bank. IMF Signals Need for "Ambitious Reforms": At a press briefing in Washington, Krishna Srinivasan, Director of the IMF's Asia and Pacific Department, said Bangladesh must undertake deeper structural reforms.
"We had very constructive discussions with the authorities," he said. "With a new government holding a strong mandate, this is an appropriate time to undertake ambitious reforms in fiscal policy, banking sector rehabilitation, and exchange rate management."
He noted that Bangladesh's revenue mobilisation remains significantly below required levels and has deteriorated over the past three years. "Substantial work remains in all three pillars of the programme," he added.
Experts Warn of Credibility Risk: Economists in Bangladesh say failure to complete the IMF programme could undermine the country's credibility with international lenders. Dr. Fahmida Khatun, Executive Director of the Centre for Policy Dialogue (CPD), said reform implementation has largely stalled.
"While some steps were initiated in the banking sector, implementation was left to future political administrations," she told The Daily Industry. "There has been no meaningful progress in revenue reforms or subsidy rationalisation. This is why the IMF is dissatisfied."
She warned that Bangladesh now faces a difficult policy choice: either fully comply with IMF conditions or risk losing access to remaining funds.
Fiscal Pressure and Policy Dilemma: Former senior finance secretary Mahbub Ahmed said failure to fully complete IMF programmes in the past has affected Bangladesh's international financial credibility.
"If Bangladesh cannot access the full committed amount, it sends a negative signal to global lenders," he said. "However, given current global conditions, meeting all IMF conditions will be extremely challenging."
He noted that in most previous IMF programmes, Bangladesh was unable to draw the final tranches due to incomplete reforms, with the exception of the 2012 arrangement.
Next Steps Uncertain: IMF officials said discussions with the Bangladeshi delegation are ongoing, and further updates will be provided after internal reviews. Meanwhile, negotiations continue over whether Bangladesh will proceed with the current programme under stricter compliance or shift to a new funding framework altogether.
For now, the suspension of the June tranche marks a critical juncture in Bangladesh's relationship with the IMF, with significant implications for fiscal policy, currency stability, and external financing in the months ahead.
