Bangladesh's economic growth is expected to slow to 3.5 per cent in the 2026–27 fiscal year and could weaken to below 3 per cent over the medium term unless decisive fiscal and banking sector reforms are implemented, the International Monetary Fund (IMF) has warned.
In a statement issued on Wednesday, IMF Mission Chief for Bangladesh Ivo Krznar said the country's growth outlook depended on stronger revenue mobilisation, greater fiscal space and reforms to address weaknesses in the banking sector.
“Staff projects economic growth to slow to 3.5 per cent in FY2027 and weaken further to below 3 per cent over the medium term in the absence of decisive reforms to strengthen revenue mobilisation and create fiscal space and to address weaknesses in the banking sector,” he said.
Krznar warned that the risks to Bangladesh's economic outlook remained tilted to the downside because of continued banking sector vulnerabilities, fiscal pressures and external challenges.
An IMF staff team led by Krznar visited Bangladesh from 12 to 16 July after the government requested a new IMF-supported programme. During the visit, the mission reviewed recent economic and financial developments and discussed the authorities' reform priorities.
According to the IMF, Bangladesh continues to face significant fiscal, financial and inflationary pressures, which have been intensified by the conflict in the Middle East.
The Fund said higher global commodity prices and supply disruptions had renewed inflationary pressures and increased subsidy costs, placing additional strain on the government's already limited fiscal space. Rising import costs have also put pressure on the country's external accounts despite continued strong growth in remittance inflows, while stress in the banking sector remains elevated.
The IMF said its discussions with the authorities were guided by the policy priorities identified during the 2025 Article IV consultation.
It recommended stronger revenue mobilisation and subsidy rationalisation to create fiscal space for higher social and development spending. At the same time, it said well-targeted social protection measures would be needed to shield vulnerable households from the impact of reforms.
The Fund also called for maintaining tight monetary and prudent fiscal policies to curb inflation and rebuild foreign exchange reserves. It urged the authorities to continue implementing the crawling peg exchange rate regime introduced in 2025 to improve exchange rate flexibility and safeguard external stability.
On the financial sector, the IMF said banking sector restructuring should be based on a credible and comprehensive strategy. It added that a well-managed clean-up of the sector would be essential to preserve macro-financial stability and support future investment.
The mission described its discussions with the Bangladeshi authorities as constructive and said talks on the possible size of a new IMF programme and its associated reform commitments would continue over the coming months.
