New Delhi: Bangladesh is seeking a new loan package worth $4.5 billion (approximately Rs 4.28 lakh crore) from the International Monetary Fund (IMF) to stabilise its economy amid worsening macroeconomic conditions and geopolitical strains caused by the war in West Asia.
Finance Minister Amir Khosru Mahmud Chowdhury and his delegation began formal discussions Monday on the sidelines of the IMF-World Bank Annual Meetings in Bangkok, with both sides reporting progress by Thursday. Chowdhury described the discussions as “fruitful”.
“In principle, everything is fine. Now, the two teams will sit together to discuss how to close the deal,” Chowdhury said Friday. He added that teams from both sides would meet over the next two to three weeks to work out the outstanding issues before deciding how to formally conclude the negotiations.
Rashed Al Mahmud Titumir, the Bangladesh Prime Minister’s Economic Affairs Adviser, did not explicitly confirm the proposed loan amount or the number of instalments, saying these details would be determined during staff-level negotiations and the subsequent IMF board review.
Details of what was discussed were reportedly leaked to Business Standard by a senior member of the delegation in a report published on Thursday.
The proposed loan is expected to be disbursed in six quarterly instalments between December 2026 and December 2029. A two-week negotiation period is due to begin next week, as Bangladesh aims to finalise a staff-level agreement by the end of 2026.
In May 2023, under former prime minister Sheikh Hasina’s Awami League government, Bangladesh secured a $4.7 billion IMF package, which was later expanded to $5.5 billion.
Following the political upheaval triggered by student protests against Hasina and the formation of a government under PM Tarique Rahman in early 2026, Bangladesh exited the previous IMF programme in May after drawing $3.8 billion.
The incoming administration argued that the programme’s conditions conflicted with national interests. The administration initially sought to rely on alternative sources of financing. However, mounting external pressures and worsening domestic economic conditions have prompted the government to reverse course and seek a new financing arrangement with the IMF.
Also read: Bangladesh’s economic crisis is a cautionary tale. For India too
The rising energy bill
The escalating conflict in West Asia has disrupted international commodity and energy supply chains. Given Bangladesh’s reliance on imported energy, the country faces rising costs for liquefied natural gas (LNG), petroleum and essential fertilisers.
Adding to these pressures, the IMF cut its GDP growth forecast for Bangladesh in the 2026-27 fiscal year to 3.2 percent from its earlier projection of 4.3 percent. It also forecast average inflation of 10.9 percent for the fiscal year.
Bangladesh’s banking system remains under severe strain, with non-performing loans (NPLs) reportedly reaching 33 percent, according to what was revealed to The Business Standard by an anonymous Bangladesh Bank delegation official.
Sonali Jain-Chandra, Deputy Director of the IMF’s Asia Pacific department, told a press conference on the Asia Pacific regional outlook in Bangkok on Thursday that revenue mobilisation is another major challenge, with the country’s revenue-to-GDP ratio “among the lowest in the world”, at around 7 percent.
Emphasis on banking sector overhaul
The new IMF programme is expected to place renewed emphasis on banking-sector reforms and revenue mobilisation, alongside measures to address the country’s fiscal pressures. Priorities under discussion include plans to reduce non-performing loans, recapitalise State-owned banks and restore depositor confidence. The IMF is also expected to press for stronger domestic tax collection.
The Business Standard also reported that according to an official from the Bangladesh Bank delegation, the discussions highlighted proposed financial-sector overhauls aimed at rebuilding depositor trust and tackling mounting non-performing loans.
Representatives are formulating a targeted roadmap to curb bad loans throughout the financial system. Although the 2023 IMF agreement set a target to lower non-performing loans to 10 percent by 2026, the ratio has instead surged toward 33 percent.
Another contentious issue is likely to be the government’s electricity and fertiliser subsidies. Reducing these subsidies could ease pressure on public finances but may also increase household and business costs, adding to the cost-of-living burden.
The proposed $4.5 billion package would provide Bangladesh with additional external financing, but it would also bring renewed reform commitments and repayment obligations. The government will need to balance the immediate need for funds against the longer-term challenge of stabilising its banking system, increasing revenue collection and managing its external debt.
The timing of the proposed disbursements will also be important, as Bangladesh’s existing obligations to the IMF and other lenders continue to fall due. The precise overlap between repayments under the previous programme and the proposed new arrangement will depend on the applicable repayment schedules and the final terms of the new agreement.
(Edited by Ajeet Tiwari)
Also read: Why Bangladesh cannot afford to trade India for China