The International Monetary Fund (IMF) staff team concluded a five-day visit to Dhaka on Thursday, projecting Bangladesh's economic growth to moderate to 3.5 percent in FY2026-27 and weaken further below 3 percent over the medium term in the absence of decisive reforms.

The visit, which took place from July 12 to 16, 2026, was led by Ivo Krznar following a request from the Bangladesh government for a new Fund-supported economic reform program.

The mission reviewed recent developments and discussed the authorities' policy plans and reform priorities.

"Bangladesh continues to face significant fiscal, financial, and inflationary challenges, which the war in the Middle East has compounded," Krznar said in a statement issued at the end of the visit.

He noted that higher global commodity prices and supply disruptions have renewed inflationary pressures, increased subsidy costs, and further constrained the country's limited fiscal space. Elevated banking sector stress and external pressures also continue to weigh on the economy, despite strong remittance growth.

The IMF warned that risks to the economic outlook remain tilted to the downside due to the potential interaction of banking sector strains, fiscal challenges, and external pressures.

To address these compounding weaknesses and safeguard macro-financial stability, the IMF team recommended several priority policy measures. 

Revenue and Subsidy Reform: Stronger revenue mobilization and subsidy rationalization are needed to create fiscal space for priority social and development spending. Well-targeted social support should be implemented to protect vulnerable households.

Monetary and Fiscal Stance: The government should maintain tight monetary and prudent fiscal policies to tame inflation and rebuild foreign exchange reserves.

Exchange Rate Flexibility: Consistent implementation of the crawling peg regime adopted in 2025 is essential to enhance exchange rate flexibility and safeguard external stability.

Banking Sector Cleanup: Restructuring of the banking sector should be anchored in a credible, comprehensive strategy with a well-managed cleanup to support investment.

Looking ahead, Krznar indicated that discussions on the possible parameters of a new arrangement—including its size and associated reform commitments—will take place in the coming months.

MSH

Companies and organisations will be required to file tax returns on the income generated by employee welfare funds from the current fiscal year and pay a 27.5 percent tax on the earnings. 

The Income Tax Act 2023 incorporates the provision, lifting the tax exemption and amnesty on the compulsion to file returns for funds such as provident funds, gratuity funds and workers' profit participation funds maintained by the private sector.

The law, however, has exempted government-managed provident funds from taxation, raising questions.

TIM Nurul Kabir, executive director of the Foreign Investors' Chamber of Commerce & Industry, said there were many other avenues to collect tax.

"Employees benefit from provident funds after their retirement. So, the authority should not slap taxes on retirement benefit."

He said while levying the tax, the government has not treated provident funds of the private and public sectors equally.

"It is discriminatory," he said, adding that they would appeal to the tax authority for the withdrawal of the tax on income from provident funds.

Debabrata Roy Chowdhury, director for legal, regulatory and corporate affairs at Nestlé Bangladesh PLC, said the introduction of income tax on trust funds would lower the overall income from such schemes.

"This will have an adverse long-term impact on retired employees of private organisations."

Chowdhury urged the authority to address the issue in line with the spirit of the government's initiatives aimed at ensuring social security for private sector employees.

"The recent introduction of the universal pension scheme for private sector employees is a good example of that."

A senior official of the NBR, on condition of anonymity, said the income of government-managed provident funds was exempted in line with the Provident Fund Act 1925.

He said provident funds under the private sector had been historically exempted and there was no requirement to submit tax returns. As a result, it was unclear whether the funds were properly utilised.

"From now onwards, we will see proper disclosure."

The tax official said the contribution of payroll tax is about 3 percent of the total income tax although it should increase as the economy is growing.

Md Shahadat Hossain, a former president of the Institute of Chartered Accountants of Bangladesh, said income from investment in savings certificates, where people invest as a source of future earnings, is already taxed.

"From that perspective, the imposition of tax on provident and other employee welfare funds seems okay."

However, Towfiqul Islam Khan, senior research fellow at the Centre for Policy Dialogue, said social protection for private sector employees was low.

"Provident and other workers' welfare-related funds provide little social protection. The imposition of tax will increase inequality. But there can't be any discrimination in taxation between private and government provident funds."

Khan, citing the latest income tax law that replaced the Income Tax Ordinance 1984, said the NBR tried to find new avenues to increase tax collection and improve the nation's revenue-gross domestic product ratio, which is one of the lowest in the world.

"We can see the desperation of the tax authority to boost collection. This ultimately reveals the inability of the NBR to catch the tax evaders and illicit money makers."