The International Monetary Fund's October World Economic Outlook forecasts 3.2% growth for Bangladesh in the 2027 fiscal year, a decrease from the 4.3% projection made in April, while average inflation is expected to rise to 10.9%.
A week earlier, the World Bank reduced its own forecast to 3.4% and stated that the weakness would persist through fiscal year 2028, while anticipating that South Asia will grow at 6.9%.
If the IMF is correct, this will mark the slowest growth rate since the 1988-89 fiscal year and position Bangladesh last among the seven South Asian economies in the institution's table.
India is projected to grow at more than twice Bangladesh's rate, while Sri Lanka, which defaulted on its external debt in 2022, is projected to grow faster than Bangladesh this year, alongside Pakistan and Nepal. The medium-term outlook is weaker still, with the IMF projecting Bangladesh's growth to fall to 2.2% in FY28.
Despite grim forecasts for growth over the same months, news from Dhaka has indicated that foreign governments and multilateral lenders are showing strong interest in deepening their investments in Bangladesh.
A joint declaration issued by Bangladesh and China in June committed both governments to modernizing Mongla Port, developing a Chinese economic and industrial zone in Chittagong, and accelerating the feasibility study for the Teesta project. In August, the Chinese ambassador stated that these initiatives could attract approximately 30 Chinese companies with investments totaling about $500 million.
Japan signed an Economic Partnership Agreement with Bangladesh in February and an emergency support loan for economic resilience and energy supply in June. Its plans now go further, as senior Japanese diplomats told The Hindu last week that Tokyo wants to build an industrial value chain around the JICA-financed deep-sea port at Matarbari, linking India's seven northeastern states, Nepal, Bhutan, and Myanmar to the Bay of Bengal. Prime Minister Tarique Rahman is expected in Tokyo at the end of October to seek Japanese financing for a Matarbari industrial, port, and commercial hub for 2026-2031.
On October 13, the Dutch minister for foreign trade and development cooperation met with the Prime Minister, who welcomed Dutch interest in the Teesta feasibility study. Meanwhile, a senior US State Department adviser stated that Bangladesh could soon become eligible for financing from the US International Development Finance Corporation. Additionally, South Korea expects that its trade agreement with Bangladesh, which is still awaiting signature, will increase Korean investment.
Multilateral lenders continue to show interest in Bangladesh, which is the largest borrower from the World Bank's International Development Association with an exposure of $22.7bn as of March 2026. Additionally, the Asian Development Bank committed $2.685bn to Bangladesh in fiscal year 2026, and the country's relationship with the International Monetary Fund remains intact.
The finance minister's statement on October 4 that he had cancelled the IMF program was read as an exit. In fact, the IMF confirmed in June that Bangladesh had applied for a new program, and in July, the finance minister said the two sides had agreed on its broad framework.
Just over a week after making his statement, the minister sought the support of the IMF and the World Bank in Bangkok. The government is leaving the program it inherited in order to negotiate new conditions, but it is not leaving the fund.
Why would these governments and lenders want to invest in an economy that is not poised to perform?
Bangladesh possesses a market of more than 170 million people that does not shrink even when its growth rate does, according to the source. This dynamic provides the country with a bargaining position that few nations with a comparable forecast possess, and evidence from other countries supports four specific reasons for this, the source states.
Investors tend to follow the size of a market rather than its growth rate. For instance, in 2016, amid a deep recession, Brazil still attracted approximately $78.9bn in foreign direct investment, which accounted for nearly half of the total inflows to Latin America.
Proposals for Bangladesh follow the same logic. The Invest Bangladesh pipeline is led by renewable energy and information technology, while Chinese proposals include the Dhaka-Chittagong highway and waste-to-energy plants. These projects serve the domestic market.
"By my own arithmetic, even 3.2% growth on an economy of about $470bn adds around $15bn of output in a year."
Secondly, governments compete for influence in large and well-placed countries. In 2015, Indonesia awarded the Jakarta-Bandung high-speed rail to China over Japan after China agreed to build it without an Indonesian government guarantee, while Japan had offered a loan at 0.1% interest.
Bangladesh is caught up in the same contest, with China, Japan, the Netherlands and the United States each seeking a role in its ports, rivers and energy.
China and the Netherlands have both offered support for the Teesta feasibility study. Japan’s response is the Matarbari project, and its diplomats point to the Southern Economic Corridor linking Thailand, Cambodia and Vietnam as the model.
Thirdly, supply chains are moving out of China. Vietnam drew a record $25.35bn in foreign direct investment in 2024 as manufacturers diversified, helped by its trade agreements and lower labour costs.
The agreement with Japan, China's zero-tariff treatment of Bangladeshi goods, and the planned agreement with South Korea give Bangladesh a similar platform.
Multilateral lenders continue to extend substantial financing to large borrowers. In 2024, Egypt secured an IMF programme worth $8 billion, a World Bank package of $6 billion and €7.4 billion in support from the European Union. In Nigeria, where the author also works, the World Bank approved approximately $9.35 billion between June 2023 and May 2026, following the government's removal of the petrol subsidy and unification of the exchange rate. According to the author, the financing in both countries was tied to reform.
However, most of this interest is still a promise, not an investment.
Ashik Chowdhury, who chairs Invest Bangladesh, said in June that the Chinese company's proposals had not been verified. Of the $1.3 billion pipeline his agency reported in September, only a little over $400 million had reached the decision or implementation stage.
UNCTAD puts total foreign direct investment into Bangladesh in 2025 at $1.8bn, and the World Bank's own commitment fell to $820m in FY26, its lowest. Interest lapses if the government does not convert it.
To secure the investments, the Ministry of Finance should conclude the new IMF program quickly, according to finance ministry officials, who describe an active program as a seal of approval that unlocks other financing.
In return, the government should accept the IMF’s conditions on raising tax revenue. Bangladesh collects only 8.3% of GDP in tax, among the lowest ratios in the world. The IMF mission discussed measures to raise that ratio as early as July, and no lender will drop the condition.
Each government-to-government partnership also requires a single owner within government and a published timetable, as published accounts of the declaration with China provide no cost or date for Mongla, Chittagong or Teesta.
Invest Bangladesh should publish a quarterly tracker of every proposal and its stage. The government should also hold to the five-year tax outlook it presented to Chinese investors.
Size is the reason an economy like Bangladesh always has room to turn around. The governments and lenders now showing interest are betting on the market, not on this year's growth rate.
The turnaround will not occur unless the government removes the constraints identified by the World Bank: gas and electricity shortages disrupting industry, non-performing loans that rose to 33.2% in June, and weak revenue collection.
The Matarbari plan also relies on relations with India, since the Maitri Bridge spanning the Feni River, the link to Tripura, is currently not operational.
The government will maintain its bargaining position only if it converts this interest into signed investment before investors turn elsewhere.
Md Rubaiyath Sarwar is Managing Director of Innovision Consulting and Trustee at Panam Institute, an Economic Think-Tank .
Why it matters
Understanding why international lenders and foreign powers continue to invest in Bangladesh despite lowered economic growth forecasts provides vital context for the country's financial future.