Finance authorities are set to seek Prime Minister's guidance as to how far the government can go in complying with the International Monetary Fund conditions to secure hard-term budget-support funds.
Finance Minister Amir Khasru Mahmud Chowdhury will lead his team at the consultation today with Prime Minister Tarique Rahman, officials say, as the IMF lending terms have seemingly outwitted negotiators.
A senior government official who attended last week's Spring Meetings in Washington says the decision has become increasingly complex as the current economic situation leaves little room to fully comply with all the IMF conditions.
"It is now a political decision rather than an economic one -- whether the government will accept the IMF conditions," the official told The Financial Express.
Key IMF strings binding the release of the next two tranches from a lending package in June 2026 include withdrawal of subsidies, raising the tax-to-GDP ratio to 9.2 per cent, and adopting a market-based exchange rate.
Given the ongoing Middle East conflict, sluggish investment, rising fuel prices, persistent inflation, and a downward trend in exports, the government is unlikely to take any drastic measures in the upcoming budget, the official adds.
"We have found the IMF quite rigid on its conditions this time. It wants the withdrawal of all tax exemptions and the introduction of a single VAT rate, which appears difficult to implement under current circumstances," the official notes.
However, IMF officials have urged the government to undertake reforms early in its tenure to minimize future challenges.
Officials at the National Board of Revenue (NBR) say achieving a tax-to-GDP ratio of 9.2 per cent by FY2026-27 would require an additional Tk 2.0 trillion in revenue collection within the next year.
At a recent coordination council meeting, the government set an NBR revenue target of Tk 6.04 trillion -- an increase by nearly Tk 1.0 trillion from the current fiscal year.
However, the revenue officials fear a revenue shortfall of around Tk 1.0 trillion in the ongoing fiscal year.
Until February, the NBR had collected Tk 2.51 trillion, roughly 50 per cent of the revised target of Tk 5.03 trillion.
Government insiders say the situation has become more complicated as the IMF has taken a firm stance on three key issues that the Ministry of Finance cannot decide on its own.
External financing from multilateral development partners largely depends on IMF assessments and approval. Following the IMF meetings, the NBR chairman held an emergency meeting Sunday to assess the feasibility of complying with the dos.
A senior NBR official has told the FE that achieving the targeted increase in the tax-GDP ratio -- from the current 6.5 per cent to 9.2 per cent -- would require around 50 per cent growth in tax revenue.
"We find these conditions difficult to implement in the current economic environment," the official says.
He adds that scrapping time-bound tax exemptions may not be legally feasible either, while withdrawing subsidies is not practical at a time when the economy is under strain due to the impact of the Mideast conflict.
"The economy does not have the capacity to absorb a complete withdrawal of tax exemptions at this stage."
However, the IMF has advised the government to implement difficult reforms early in its tenure for long-term economic stability.
"We cannot increase revenue overnight simply by curbing tax evasion or recovering arrears," the NBR official says in clear terms.
The revenue board is currently conducting intensive internal assessments to evaluate the potential impact of implementing the IMF conditions.
Dr Fahmida Khatun, executive director of the Centre for Policy Dialogue (CPD), suggests the government should prepare a roadmap to implement IMF conditions.
She, however, finds it difficult to implement all conditions by next year, such as withdrawal of all tax exemptions.
"We need IMF funds but the government needs to be cautious as economy is not prepared now to absorb the pressure," she adds.
There are many sectors that need tax benefits and fiscal support to grow, she notes.
doulotakter11@gmail.com
© 2026 - All Rights with The Financial Express
