Bangladesh seeks new IMF bailout as Iran war devastates economy
Al Jazeera Staff
Bangladesh has formally requested a new support program from the International Monetary Fund as the nation reels from the economic fallout of the U.S.-Israeli war against Iran. The conflict has triggered soaring energy costs, disrupted supply chains, and increased foreign debt, prompting Dhaka to seek billions in emergency loans.
The International Monetary Fund (IMF) said on May 27 that Bangladesh has requested a new support program as the country's economy suffers the consequences of the war launched by the United States and Israel against Iran.
The IMF did not disclose the size or specific terms of the package requested by Bangladesh. IMF mission chief Ivo Krznar said, 'IMF staff are discussing with the Bangladesh authorities about the reform program and policy priorities.'
Earlier, in March 2026, the Bangladeshi government announced it was seeking US$2 billion in loans from multiple donors to cope with the energy crisis caused by the Iran war.
Energy crisis
The war, which began on February 28, 2026, when the U.S. and Israel attacked Iran, has triggered a global energy crisis and sent fuel prices soaring. The Strait of Hormuz — which before the war carried one-fifth of the world's crude oil and natural gas, most of it headed for Asia — remains under Iranian control while the U.S. maintains a naval blockade. The situation has pushed oil prices to around US$100 per barrel, up from US$66 before the war.
Bangladesh, with 170 million people, imports 95% of its oil and liquefied natural gas (LNG) demand, primarily from the Middle East. Demand is especially high in summer. Dhaka has imposed fuel consumption restrictions, including halting production at most fertilizer plants. On April 19, Bangladesh raised fuel prices by 10-15%, pushing gasoline from $0.95 per liter to $1.10 per liter.
Garment industry weakened
The garment industry — which accounts for more than 80% of Bangladesh's exports — has also been hit hard. Factories importing raw materials from China via the Red Sea and Middle East, where shipping routes are disrupted, face rising costs. Sayeed Ahmed Chowdhury, director of fabric manufacturer Square Denim, predicted orders could fall 20-25% in the coming season. After the war broke out, many airlines canceled flights in March 2026, leaving garments destined for Inditex and other major retailers stranded at airports in Bangladesh and India.
Raw material prices surge
The price of plastic resin — a key raw material for plastics production — has risen from $900-950 per ton to $1,500-1,600 per ton due to higher crude oil prices. The war has also disrupted supply chains for other industrial inputs.
Foreign debt burden
According to an IMF assessment, Bangladesh's external debt has increased in recent years as the government has borrowed more for infrastructure projects and to shore up the balance of payments. In December 2025, Bangladesh's external debt stood at $113.5 billion, up from $112.2 billion the previous quarter. In 2024, the World Bank and IMF ranked Bangladesh as low-risk for debt distress, with the debt burden at about 22% of gross national income, but that could change due to the consequences of the Iran war.
History of cooperation with the IMF
Bangladesh is currently implementing a $5.7 billion IMF support program that began in 2023 and runs for four years. During a virtual meeting last week between Finance Minister Amir Khasru Mahmud Chowdhury and IMF Deputy Managing Director Nigel Clarke, the two sides agreed to move quickly on a new program. Last week, the World Bank approved a $350 million loan to help Bangladesh manage rising fuel import costs and strengthen energy security.
The IMF has warned that the Iran war risks increasing global public debt. An April 2026 IMF report estimated that total global government debt reached nearly 94% of world GDP last year and could hit 100% by 2029, a level not seen since after World War II.
