The International Monetary Fund has approved Bangladesh’s third and fourth reviews of a $4.7 billion loan program, unlocking a financing package worth $1.33 billion. Of that total, $884 million is being disbursed immediately under the Extended Credit Facility and Extended Fund Facility. An additional $453 million will flow through the Resilience and Sustainability Facility, which is tied to climate resilience and longer-term recovery measures. The IMF also approved a 6-month extension and an augmentation of 567.2 million Special Drawing Rights (SDRs) in recognition of rising external financing requirements and slowing global growth. The loan release is contingent on Bangladesh meeting new reform conditions set by the Fund. Key among these conditions is the transition toward a more flexible exchange rate system. After prior delays, Bangladesh has agreed to adopt a crawling peg mechanism for the taka. This was a major sticking point during negotiations and is now formally part of the agreement. To improve revenue, the government has decided to reform the National Board of Revenue (NBR) by breaking it up into two separate organizations: one focused on policymaking and the other on collecting revenue. This reform aims to enhance transparency and strengthen tax administration, aligning with IMF demands. Although the IMF acknowledged persistent challenges—such as high inflation, slower economic growth, and pressure on foreign reserves—it described Bangladesh’s program performance as “broadly satisfactory.” Still, meeting the new conditions remains crucial to maintaining macroeconomic stability. Bangladesh first requested IMF assistance in 2023 amid rising global commodity prices triggered by Russia’s invasion of Ukraine. Since then, it has drawn two tranches, totaling approximately $2.3 billion. The upcoming disbursement is the largest single sum so far. These reforms are part of a broader effort to shore up the economy and attract further support from international development partners. Bangladeshi officials expect up to $2 billion in budget support from institutions like the World Bank, Asian Development Bank, AIIB, Japan, and the OPEC Fund. In summary, the latest IMF agreement provides significant financial relief—but also sets clear conditions. Bangladesh must continue to implement exchange rate flexibility, overhaul tax governance, and pursue policy reforms to secure the remaining funds. Success in these areas could strengthen economic resilience, rebuild reserves, and restore investor confidence.
