Bangladesh Decides to Formally Retreat from Previous IMF Programme

The Bangladesh government has decided to formally go back on its existing loan arrangement with the International Monetary Fund (IMF), reached during the time of the former Awami League administration, deciding to head for negotiations for seeking a fresh $5 billion financing package under revised conditions, marking a major shift in the country’s approach to economic policy.

The decision was confirmed following a high-level virtual meeting on May 21 between a Bangladeshi delegation led by Finance and Planning Minister Amir Khosru Mahmud Chowdhury and an IMF team headed by Deputy Managing Director Nigel Clarke.

According to a statement issued by Bangladesh’s finance ministry on May 25, the talks focused on macroeconomic stability, the status of ongoing IMF programmes and the future framework for cooperation between Dhaka and the lender.

During the discussions, Chowdhury said the current IMF programme had been designed under a very different political and economic environment and was no longer reflective of the current socio-economic realities which were being faced by the newly elected government.

He argued that changing domestic conditions, political economy pressures and global uncertainties had created major obstacles to implementing several of the programme’s structural reforms.

Reaffirming the government’s commitment to broader economic reform and macroeconomic stability, the minister stressed that Dhaka wanted a more “realistic” and “well-sequenced” reform roadmap aligned with the country’s present circumstances.

In the light of these points, the virtual meeting focused heavily on launching a brand-new IMF credit facility under the newly elected government. The alternative framework proposes a realistic three-year timeline incorporating attainable, priority reforms structured around practical sequencing.

IMF’s Nigel Clarke welcomed Bangladesh’s updated reform initiatives and its proposal for a new facility, expressing hope for a continued close and constructive engagement between the lender and the state.

The decision to abandon the existing arrangement reportedly follows months of deadlock over IMF conditionalities.

According to senior ministry officials, the IMF had been pressing Bangladesh to impose a uniform 15% VAT rate, remove tax exemptions and replace broad subsidies on electricity and fertilizer with targeted cash-transfer programmes.

International development partners have also reportedly expressed concern over amendments introduced under the Bank Resolution Act 2026, which some donors view as weakening transparency safeguards.

According to Chowdhury, the BNP government cannot accept donor conditions as they contradict public interests, and the party’s manifesto.

Despite these tensions, officials in Dhaka maintain that retaining an active IMF programme remains strategically important due to it acting like an institutional endorsement that will help unlock between $3 billion and $4 billion in annual parallel monetary assistance from other money lending institutions such as the World Bank and the Asian Development Bank.

An IMF mission is expected to visit Dhaka in July or August to negotiate the size, structure and conditions of the proposed new programme.

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