Bangladesh is expected to secure $645 million from the International Monetary Fund (IMF) by February 10, as the fourth tranche of a $4.7 billion loan program, provided the stipulated conditions are met, IMF Mission Chief Chris Papageorgiou announced on Thursday.
At a press conference held at the Ministry of Finance, Papageorgiou confirmed that the proposal for disbursing the fourth tranche would be presented to the IMF Board on February 5.
In addition to the fourth installment, Bangladesh will receive $80 million from a newly agreed $750 million loan. This funding will be disbursed alongside another $80 million in June 2025, Finance Secretary Khairuzzaman Majumdar stated.
Economic Outlook and Challenges
Addressing the economic outlook, Finance Adviser Dr. Salehuddin Ahmed described the IMF’s assessment as “realistic.” Following the third review of the loan program, the IMF projected a modest growth of 3.8% for Bangladesh, coupled with persistently high inflation at 11%.
“The current economic situation is challenging rather than gloomy,” Ahmed said, expressing confidence that inflation could drop to 8% by December 2024, with average inflation declining to 9% by June 2025.
Ahmed welcomed the IMF’s recommendations for banking sector reforms, emphasizing the importance of reducing non-performing loans, improving asset quality, and strengthening governance.
Tax Reforms and Revenue Targets
The IMF has called for a rationalization of tax exemptions and an increase in the tax-to-GDP ratio by 0.5% in FY25, targeting 7.9%. To achieve this, Bangladesh will need to collect at least Tk4.6 lakh crore, marking a 21% increase from FY24’s revenue earnings.
Ahmed highlighted ongoing efforts to expand the tax base, automate tax systems, and minimize direct taxpayer-official interactions. He noted that some tax exemptions have already been eliminated, and further reviews are underway.
To bridge the $3 billion resource gap, contributions are expected from the IMF ($750 million), the World Bank ($500 million), and the Asian Development Bank (ADB).
When questioned about the proposed dearness allowance for government employees, Ahmed dismissed concerns that it would exacerbate inflation.
The IMF has set stringent conditions for additional funding, including raising electricity prices. However, the government remains hesitant to increase electricity tariffs before June 2025 due to the prevailing high inflation.
The IMF’s engagement with Bangladesh underscores the critical need for fiscal discipline and structural reforms to ensure sustainable economic growth.
