B Mirror Report: Bangladesh may need to introduce excise duty on fuel, expand tax collection and undertake major banking-sector reforms to secure a proposed $4.5 billion loan from the International Monetary Fund (IMF).
Preliminary discussions between the government and the IMF have identified several potential conditions for the three-year lending programme, according to officials familiar with the negotiations.
The proposed measures include a comprehensive assessment of banks’ financial health, credible estimates of capital shortfalls and bank-specific plans to resolve troubled institutions. On the fiscal front, the IMF has recommended withdrawing tax exemptions, introducing a standard 15% VAT rate and reducing fertiliser subsidies.
A delegation led by Finance Minister Amir Khosru Mahmud Chowdhury will attend the seven-day IMF-World Bank annual meetings in Bangkok, Thailand, beginning Monday. Detailed discussions on the proposed programme are expected during the meetings.
Senior officials from the Finance Division, Financial Institutions Division, Bangladesh Bank and the National Board of Revenue (NBR) will join the talks.
The IMF has emphasised a time-bound Asset Quality Review (AQR) of banks to determine their actual financial condition, capital requirements and potential resolution costs.
Bangladesh has been asked to assess all banks and share the findings with the Fund. Under the proposed framework, banks would be classified as financially viable, viable but undercapitalised, or non-viable and insolvent.
The lender has also sought individual resolution plans for weak banks, outlining capital requirements, loss-sharing arrangements, fiscal support and implementation timelines.
It has advised Bangladesh not to rely primarily on recovering non-performing loans to finance bank restructuring. The IMF also wants a detailed assessment of merged banks to determine how they can restore capital adequacy and reduce dependence on central bank support.
The IMF has recommended broadening the tax base, modernising excise duties on tobacco and introducing excise duty on fuel. Other proposals include withdrawing tax and VAT exemptions granted through statutory regulatory orders, increasing the tax-to-GDP ratio and introducing a standard 15% VAT rate.
The lender has reiterated the need to maintain the automatic fuel-pricing mechanism, reduce fertiliser subsidies and limit excessive reliance on withholding taxes for revenue collection.
The government is expected to present a realistic, time-bound plan for implementing the reforms. Discussions will also cover fiscal support for bank restructuring and how the associated costs should be shared.
The IMF approved a $4.7 billion loan arrangement for Bangladesh on January 30, 2023. Of the original amount, $3.64 billion was disbursed in five instalments. The programme was expanded to $5.5 billion in June 2025 during the interim government.
The current government decided not to continue with the programme, citing changing economic challenges and stringent conditions. It informed the IMF of its position during the IMF-World Bank spring meetings in April 2026.
On June 3, the government formally requested a new lending programme, which the IMF subsequently welcomed.
Zahid Hussain, former lead economist at the World Bank’s Dhaka office, told media that the government had not continued the automatic fuel-pricing mechanism and other reforms recommended under the previous programme.
He said the new programme’s conditions would likely remain broadly similar, with revenue mobilisation and banking-sector reforms at the centre of negotiations. Bangladesh might seek flexibility on energy subsidies given its current economic circumstances, he added.
Hussain also noted that progress on the AQR process had been limited and said reputable audit firms should conduct the reviews.
The upcoming discussions in Bangkok are expected to clarify the proposed loan conditions, including the pace of fiscal reforms and measures to address weaknesses in the banking sector.
