IMF satisfied with Bangladesh’s reserves and inflation, but concerned over tax-GDP ratio
The IMF delegation also raises concerns about slow ADP implementation
Highlights:
- Bangladesh's net reserves now stand at $20.5b, as per IMF's BPM6
- IMF-set target was $18b for September and $19.9b for December
- BB advised to continue tight monetary policy to contain inflation
- But IMF unconvinced about revenue performance
- It also raises concerns about slow ADP implementation
The International Monetary Fund (IMF) has expressed satisfaction with Bangladesh's performance in controlling inflation and maintaining foreign currency reserves, but remains unconvinced regarding the country's tax-GDP ratio, citing a shortfall in revenue collection targets.
The observations followed the first round of meetings held in Dhaka today (29 October) as part of the IMF's 5th Review Mission to Bangladesh. The mission, led by Chris Papageorgiou, will remain in the country until 13 November for a comprehensive review and talks with the Bangladesh Bank and various ministries.
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An executive director of the Bangladesh Bank, who attended the meeting, told TBS that the IMF had reviewed the country's reserve position and expressed satisfaction with the current level.
"The IMF was pleased that our reserves have exceeded the target. According to their benchmark, the net reserve target for September 2025 was set at $18 billion, and for December at $19.9 billion. Currently, our net reserves stand at $20.5 billion," he said.
He added that the central bank informed the IMF team that inflation has been trending downward in recent months. "The IMF representatives acknowledged the improvement but advised that the central bank continue its contractionary monetary policy to maintain this trend," the Bangladesh Bank executive director noted.
However, the IMF delegation expressed concern over Bangladesh's low tax-to-GDP ratio, describing it as a key structural weakness that continues to limit fiscal capacity, he said.
The meetings with the Bangladesh Bank, presided over by Deputy Governor Nurun Nahar, focused heavily on ongoing reforms and the stability of the banking sector. Key topics of discussion included liquidity monitoring and management in illiquid banks, implementation of risk-based supervision, restrictions on deposit withdrawals in certain banks and the financial health of merged banks.
Fiscal deficit and revenue shortfall
Earlier in the day, IMF officials paid a courtesy call on Finance Secretary Md Khairuzzaman Mozumder. Later, they held separate meetings with officials from the Macro-Economic and Budget Wings of the Finance Division.
During these discussions, IMF representatives sought clarification on the reasons behind Bangladesh's revenue shortfall under the loan programme benchmarks. They also inquired whether the government plans to increase domestic and external borrowing to offset the revenue deficit.
According to a finance ministry official, the IMF team asked about the measures being considered to boost revenue collection in the remaining months of the fiscal year and whether political uncertainty surrounding the upcoming elections might further affect tax mobilisation.
The IMF also questioned the slow implementation of the Annual Development Programme (ADP) in the current fiscal year and sought information on any new initiatives planned to accelerate development spending.
A senior official at the Finance Division said, "The first day's meetings focused on preliminary discussions across several areas. In the coming days, the review mission will engage in more detailed assessments of Bangladesh's key macroeconomic indicators and fiscal performance."
