Bangladesh faces growing risks to macroeconomic stability from weak revenue mobilisation and vulnerabilities in the banking sector, the International Monetary Fund (IMF) has warned, calling for bold fiscal, financial and structural reforms to safeguard the economy.
The caution came as the IMF Executive Board concluded its 2025 Article IV Consultation with Bangladesh on 26 January, with the authorities consenting to the publication of the staff report.
The IMF noted that while policies should focus on safeguarding fiscal sustainability and strengthening macro-financial stability, comprehensive structural reforms will be essential over the medium term to improve governance, create jobs and promote economic diversification.
The IMF warned that growing risks to macroeconomic stability stem from weak revenue mobilisation and vulnerabilities in the banking sector, urging bold fiscal, financial and structural reforms to safeguard the economy.
According to the IMF, Bangladesh’s economy has slowed in recent years, with GDP growth declining to 3.7% in FY25 from 4.2% in FY24 and 5.8% in FY23, amid production disruptions during the 2024 uprising, tighter macroeconomic policies and weak investment. Inflation, though easing from double-digit levels earlier in FY25, remained elevated at 8.2% year-on-year in October.
The IMF said weak tax revenue continues to constrain fiscal space, even though the overall fiscal deficit was contained in FY25 largely due to under-execution of capital and social spending. At the same time, vulnerabilities in the financial sector, particularly in banks, pose significant risks to economic stability.
Despite the challenges, the IMF expects a gradual recovery, projecting GDP growth to rebound to 4.7% in FY26 and FY27, provided reforms to mobilise revenue and strengthen the financial sector are implemented. Over the medium term, growth could accelerate to around 6%. Inflation, however, is projected to remain high at 8.9% in FY26 before easing to about 6% in FY27.
Executive Directors acknowledged the interim authorities’ efforts to stabilise the economy but stressed that uneven programme performance and delays in reforms are weighing on growth prospects. They urged decisive and sustained policy actions, particularly ambitious tax reforms, subsidy rationalisation and stronger public financial management.
The IMF concluded that as Bangladesh prepares to graduate from least developed country (LDC) status, comprehensive reforms to strengthen governance, boost job creation - especially for youth - and diversify exports will be key to ensuring sustainable and inclusive growth.
Courtesy: The Daily Sun
