IMF Sees Bangladesh Growth Slowing to 3.5% in FY27

The International Monetary Fund (IMF) has projected Bangladesh's economic growth to slow to 3.5 percent in FY2026-27, warning that growth could weaken to below 3 percent over the medium term unless decisive economic reforms are implemented.

An IMF staff team concluded a five-day visit to Dhaka on Thursday after holding discussions with government officials on the country's economic outlook and a possible new Fund-supported reform programme.

The mission, led by Ivo Krznar, visited Bangladesh from July 12 to 16 following the government's request for a new IMF-supported economic reform programme. The discussions focused on recent economic developments, policy priorities and reform plans.

In a statement issued at the end of the visit, Krznar said Bangladesh continues to face significant fiscal, financial and inflationary challenges, which have been compounded by the ongoing conflict in the Middle East.

He said higher global commodity prices and supply-chain disruptions have renewed inflationary pressures, increased subsidy costs and further constrained the country's limited fiscal space. Although remittance inflows remain strong, stress in the banking sector and external vulnerabilities continue to weigh on the economy.

The IMF cautioned that risks to the economic outlook remain tilted to the downside, citing the combined impact of banking sector weaknesses, fiscal pressures and external challenges.

To strengthen macroeconomic stability, the IMF recommended several key policy measures, including stronger revenue mobilisation, rationalisation of subsidies and better-targeted social protection to safeguard vulnerable households.

The Fund also advised maintaining a tight monetary policy and a prudent fiscal stance to curb inflation and rebuild foreign exchange reserves.

It further stressed the importance of consistently implementing the crawling peg exchange rate regime introduced in 2025 to enhance exchange rate flexibility and strengthen external stability.

The IMF also called for a credible and comprehensive strategy to restructure the banking sector, saying a well-managed clean-up would help restore confidence and support investment.

Looking ahead, Krznar said discussions on the possible size and policy commitments of a new IMF-supported programme would continue in the coming months.