IMF sees Bangladesh growth rebounding to 4.7% in FY26–27

ISLAMABAD: The International Monetary Fund (IMF) has projected that Bangladesh’s economy will rebound to 4.7% growth in both FY26 and FY27 following a recent slowdown, though significant macro-financial challenges persist.

The assessment followed the IMF’s completion of its Article IV Consultation with Bangladesh, with authorities agreeing to publish the staff report.

Bangladesh’s GDP growth slowed to 3.7% in FY25 from 4.2% in FY24 and 5.8% in FY23, largely due to production disruptions during the 2024 popular uprising, tighter policy measures, and weak private investment.

Inflation, while easing from previous double-digit levels, remained elevated at 8.2% year-on-year in October FY25.

Tax revenue collection also weakened, leading to a sharp fall in the tax-to-GDP ratio.

However, the fiscal deficit remained contained due to under-execution of capital and social spending, while foreign exchange reserves began to rebuild on the back of an improved current account balance.

Gradual recovery 

Looking ahead, the IMF expects a gradual recovery over the medium term, with growth projected to accelerate toward around 6%, while inflation is expected to remain elevated at about 8.9% in FY26 before easing to around 6% in FY27.

Risks to this outlook remain tilted to the downside, particularly if policy implementation is delayed, exchange rate reforms are reversed, or fiscal discipline weakens.

IMF Directors commended the interim authorities’ stabilization efforts post-uprising but emphasized ongoing vulnerabilities, including weak revenue mobilization, banking sector fragilities, incomplete exchange rate reforms, and high inflation. 

They called for bold fiscal and financial reforms, including ambitious tax reforms, rationalization of subsidies, improved public investment management, and strengthened social safety nets. Banking sector reforms were also highlighted, with a focus on asset quality reviews, recapitalization, and robust restructuring frameworks.

On monetary policy, the IMF stressed maintaining a tight stance to rebuild reserves and curb inflation, alongside full implementation of exchange rate reforms. 

Structural reforms were urged to enhance governance, promote job creation, diversify exports, and support Bangladesh’s transition from least developed country status. Continued efforts under the Resilience and Sustainability Facility were noted as key to climate resilience and mobilizing climate finance.