Bangladesh must press ahead with structural reforms to sustain its economic recovery as negotiations begin on a new $4.5bn-5bn support programme with the International Monetary Fund (IMF), Dhaka Tribune reported.

Following an initial round of discussions with the Finance Division, Bangladesh Bank, the National Board of Revenue (NBR) and Finance Minister Amir Khasru Mahmud Chowdhury, the IMF said recent improvements in key economic indicators were encouraging but cautioned that they reflected cyclical factors rather than lasting structural changes.

The IMF identified four priority areas for reform: reducing subsidies, restructuring the banking sector, modernising tax administration and delaying the introduction of a new public sector pay scale. According to officials familiar with the discussions, the lender believes progress in these areas will be essential to achieving durable macroeconomic stability.

The IMF acknowledged that Bangladesh's external position has strengthened in recent months, supported by higher foreign exchange reserves, lower exchange rate volatility, resilient exports and remittance inflows, and easing inflation. However, it warned that these gains could prove temporary unless underlying weaknesses in the economy are addressed.

The banking sector emerged as a key area of concern during the discussions. IMF officials highlighted rising non-performing loans, governance shortcomings, capital deficiencies and the financial condition of several banks, particularly Islamic lenders that have relied on emergency liquidity support.

The mission sought further details from Bangladesh Bank on emergency assistance provided to vulnerable commercial banks, including repayment plans, compliance requirements and the financial health of recipient institutions. It also called for stricter loan classification standards, more realistic provisioning for bad loans and greater transparency in reporting banking sector risks.

Fiscal policy was another major focus of the talks. While recognising the government's commitment to reducing subsidies, the IMF noted that significant liabilities, particularly in the power sector, continue to weigh on public finances. It recommended postponing a planned revision of the public sector pay scale, warning that higher government spending could increase domestic demand and complicate efforts to contain inflation.

The lender also reiterated the need to gradually reduce energy subsidies while shifting fiscal policy towards long-term sustainability rather than short-term support measures.

On tax reform, the IMF renewed its call for a separation of tax policy formulation from revenue collection within the National Board of Revenue, arguing that the move would improve transparency, accountability and administrative efficiency. It also encouraged Bangladesh to broaden its tax base, reduce discretionary tax exemptions and strengthen parliamentary oversight of public finances.

According to NBR officials, current reforms are focused on expanding the taxpayer base across districts and upazilas while gradually reducing unnecessary corporate tax incentives to improve compliance without undermining investment.

Finance Minister Amir Khasru Mahmud Chowdhury said the government would pursue reforms in line with Bangladesh's economic priorities, balancing fiscal objectives with broader social and economic considerations.

Economists said a new IMF programme would not only provide additional financial support but also help strengthen investor confidence and unlock further funding from multilateral development partners, including the World Bank, the Asian Development Bank (ADB) and the Japan International Cooperation Agency (JICA), as Bangladesh faces rising external debt servicing obligations.