Bangladesh is seeking financing arrangements with the International Monetary Fund (IMF) and other development partners that accommodate its economic recovery priorities, including banking sector rehabilitation, energy security, tax reforms and private investment, while resisting a uniform set of reform prescriptions that the government says may not suit the country’s circumstances.
Finance and Planning Adviser Dr Rashed Al Mahmud Titumir said the government had presented its reform agenda during discussions on the sidelines of the IMF-World Bank annual meetings in Bangkok, arguing that the country’s economic vulnerabilities, the external energy shock and its impending graduation from least developed country (LDC) status required a tailored approach to development financing.
The government is pursuing a five-year strategic framework, from fragility to prosperity, with a three-stage recovery plan aimed at stabilising the economy, restoring economic momentum and accelerating reconstruction and growth to build a $1 trillion economy by 2034. At the same time, it is negotiating with multilateral lenders over financing and reform priorities, with technical discussions expected to continue before formal approvals and initial disbursements targeted around December.
In an interview with The Financial Express in Bangkok, Dr Titumir outlined the government’s plans to address weaknesses in the banking system, raise the tax-to-GDP ratio from below 7 per cent to 10 per cent over five years, separate revenue policy-making from tax collection, and increase private sector credit to revive investment and employment.
He also defended the government’s decision to cushion consumers from the recent surge in imported energy costs, discussed social protection programmes intended to mitigate inflation, and said the administration wanted development partners to support its electoral commitments rather than impose a standardised reform model.
“The ‘one size fits all’ approach does not apply here,” he said, arguing that the government’s reform priorities reflected the specific conditions inherited by the country and the mandate of an elected administration.
Tailored reforms in IMF discussions
Dr Titumir said Bangladesh had explained three principal factors behind its demand for a country-specific approach to financing and economic reforms.
These were the damage to the economy and banking system from past financial irregularities, the additional pressure from the global energy crisis, and the challenges associated with the country’s impending graduation from LDC status.
He said the government wanted to retain ownership of its reform programme while working with the IMF, the World Bank and other development partners.
“It is globally accepted that the IMF toolkit is uniform. But ‘one size fits all’ does not apply here — this is a major departure,” he said.
“Our reform ownership belongs to an elected, democratic government. We presented our three unique realities, and multilateral partners agreed to support our specific priorities.”
The adviser said the government was continuing technical discussions to fine-tune the proposed arrangements. Formal approvals by the relevant lending institutions’ boards and initial disbursements were expected around December, although the timing would depend on the completion of the necessary processes.
Bangladesh is also seeking a larger share of concessional financing under the forthcoming replenishment of the International Development Association (IDA), the World Bank’s concessional lending arm.
Dr Titumir said the success of the meetings should not be judged merely by the discussions held in Bangkok.
“Success will not be measured by the conference itself, but when our electoral promises are fulfilled and public lives improve,” he said.
$40 billion banking-sector recovery bill
The banking sector remains one of the government’s most pressing economic challenges, according to the adviser, who said the damage accumulated over previous years had created a substantial burden on the economy.
He estimated that a conservative calculation of the resources required to recover from the banking system’s disorder amounted to around $40 billion.
“If we make a very conservative calculation to recover from the chaotic situation created in the banking system, $40 billion will be required,” he said.
He linked the banking sector’s weaknesses to the broader economic slowdown, pointing to factory closures, job losses and the absence of sufficient new employment opportunities.
“Factories have shut down, no new employment was created, and many lost jobs,” he said, adding that prolonged inflation had further intensified pressure on households.
The government has moved to consolidate five weak banks into Sammilito Islamic Bank, which Dr Titumir described as the country’s largest state-owned bank by paid-up capital.
He said the restructuring was intended to restore confidence in the financial system and enable depositors to regain access to their savings. Depositors began being allowed to withdraw money from September 1 under a schedule that also incorporates reductions in the amounts recoverable by some depositors.
The scale of the estimated $40 billion recovery requirement, however, highlights the financial challenge facing the government as it seeks to restore confidence, revive lending and strengthen the banking system without placing excessive pressure on public finances.
Private credit targeted at Tk 800 billion to Tk 1,000 billion
Dr Titumir said weak private sector credit growth was inconsistent with the government’s ambition to restore economic momentum.
He said the government wanted private sector credit flows to increase substantially, reaching between Tk 800 billion and Tk 1,000 billion by December.
“A 5 per cent credit growth can never be a target for any country,” he said.
The government has also prepared a Tk 600 billion stimulus package and made adjustments to fiscal and monetary policies, he added.
Dr Titumir expressed the expectation that Bangladesh Bank, which he described as an autonomous institution, would lower interest rates to support economic recovery.
“In fragile economies, reducing interest rates can drive recovery despite inflation,” he said.
The policy challenge is to stimulate private investment and employment while containing inflationary pressures. Lower borrowing costs could support business activity, but the effectiveness of such a move would depend on inflation trends, financial-sector stability and the availability of credit to productive businesses.
The adviser also pointed to growing foreign investor interest, including US interest in offshore energy blocks, development of the Matarbari energy hub, and commitments from China and South Korea.
Energy shock adds to economic pressure
The adviser said Bangladesh’s economic difficulties had been aggravated by the energy crisis associated with the conflict in the Middle East, which has increased the cost of importing fuel and other energy supplies.
He said additional energy import costs had reached $4.12 billion over the preceding eight months under conservative estimates.
According to Dr Titumir, the pressure reflected both the external shock and the country’s long-standing dependence on imported energy, alongside insufficient domestic gas exploration.
He said the government had chosen not to pass sudden increases in the cost of oil, gas and electricity directly on to consumers, seeking to protect low-income households from further financial pressure.
The decision to cushion consumers, however, places additional demands on public finances at a time when the government is also seeking resources to rehabilitate banks, revive industrial activity and expand social protection.
The adviser said the government’s recovery framework was designed to address these interconnected challenges rather than treat them as isolated problems.
Three-stage strategy targets $1 trillion economy
Dr Titumir said the government’s five-year strategic framework, titled From Fragility to Prosperity, would guide the transition from economic stabilisation to faster growth.
The strategy, known as the “3R” framework, has three stages: recovery and stabilisation, restoration of economic momentum, and rapid reconstruction and growth. The ultimate goal is to build a $1 trillion economy by 2034.
He said the framework had received support from the leadership of the World Bank, the IMF, the Asian Development Bank and the Islamic Development Bank.
The economic programme is also linked to the government’s stated vision of building a democratic and humane welfare state under the principle of “Bangladesh for All”.
Dr Titumir said the government intended to increase allocations for health and education progressively towards 5 per cent of gross domestic product.
The proposed shift would require sustained revenue growth, improved public expenditure management and greater investment in human development, alongside the restoration of private investment and employment.
Tax reforms aim to raise tax-to-GDP ratio to 10 per cent
Improving domestic revenue mobilisation is another central element of the government’s discussions with development partners.
Dr Titumir criticised the legacy of a tax system that, he said, had been shaped by oligarchic interests and had failed to generate sufficient revenue for public investment and social services.
He described Bangladesh’s tax-to-GDP ratio of below 7 per cent as “shameful”.
The government has set a target of increasing the ratio to 10 per cent over the next five years, covering value-added tax, income tax and customs revenue.
Dr Titumir said administrative adjustments had already helped revenue collection grow by 13 per cent between mid-February and June 30.
He said the government was also preparing a major institutional reform of the National Board of Revenue (NBR), aimed at separating revenue policy-making from revenue collection.
A consensus committee had consulted stakeholders, business associations and other interested groups before preparing draft recommendations, he said.
“A consensus committee, of which I was a member, conducted broad consultations with all stakeholders and associations so that everyone owns the institutional reform,” he said.
“The draft recommendations for splitting revenue policy and revenue collection are currently in process, and an executive order will be issued shortly.”
The proposed separation is intended to address structural weaknesses in the revenue administration and improve the institutional basis for tax reform.
The challenge will be to translate the planned reorganisation into sustained revenue growth, broader tax compliance and a more predictable tax environment for businesses.
Raising the tax-to-GDP ratio would also give the government greater scope to finance infrastructure, health, education and social protection while reducing its reliance on borrowing and external assistance.
Family Card and Farmer’s Card to protect vulnerable households
Dr Titumir said the government had introduced social protection initiatives to mitigate the effects of inflation and support vulnerable households.
The Family Card and Farmer’s Card programmes are among the administration’s flagship measures.
He said the government approved a waiver of farmers’ loans at its first cabinet meeting and launched the Family Card within 23 days of taking office.
According to the adviser, independent research institutions had projected that the Family Card programme alone could reduce poverty by five percentage points over five years.
“Both the World Bank and the IMF acknowledged that our Family Card and Farmer’s Card programmes will play a major role in controlling the impact of inflation,” he said.
He added that the government viewed social protection as an integral part of economic recovery, rather than a separate welfare measure.
The initiatives are intended to provide relief to vulnerable groups as the government seeks to stabilise prices, revive employment and protect household purchasing power.
Dr Titumir said nearly eight million people had been pushed below the poverty line before the election, according to estimates available at the time.
He argued that the economic recovery programme therefore had to deliver tangible improvements in living standards alongside macroeconomic stabilisation and institutional reform.
LDC graduation and concessional financing
The adviser said Bangladesh’s impending graduation from least developed country status was another factor shaping its approach to development financing.
Graduation will bring changes to the country’s international trade and development environment, making it important to strengthen competitiveness, expand investment and improve the capacity to finance development from domestic resources.
Dr Titumir said Bangladesh had raised this concern in its discussions with multilateral partners and was seeking greater access to concessional resources, including through the next IDA replenishment.
He maintained that financing terms and reform priorities should reflect the country’s transition challenges, its economic vulnerabilities and its development objectives.
Source: https://thefinancialexpress.com.bd/economy/bangladesh-seeks-tailored-imf-support-as-it-targets-1-trillion-economy-by-2034
