Greek economists Michael Chletsos and Andreas Sintos conducted a study to examine how participation in International Monetary Fund (IMF) loan programs between 1981 and 2014 affected employment in the countries involved. Their research found that in nations receiving IMF loans with stringent conditions, unemployment increased, job opportunities shrank, and labor market uncertainty deepened. Using data from the International Financial Statistics (IFS) and the World Development Indicators (WDI), the researchers showed that millions lost their jobs as these countries implemented IMF-imposed measures such as reducing budget deficits, privatizing state-owned enterprises, liberalizing labor markets, and cutting public spending. Social safety nets weakened as a result. The study, titled “The Effects of IMF Conditional Programs on the Unemployment Rate,” was published in the European Journal of Political Economy.

In the aftermath of the COVID-19 pandemic, the government of Sheikh Hasina (later ousted from power) came under severe pressure due to a dollar shortage, high inflation, instability in the banking sector, and a slowdown in economic activity. To address the multifaceted crisis, the then-government turned to the IMF in late 2022. In exchange for a $4.7 billion loan program, it had to comply with more than 50 conditions. Fulfilling those requirements led to higher inflation in the country. Private sector investment contracted, and unemployment began to rise.

Analysts note that the government joined the IMF loan program at the beginning of 2023 and started implementing the conditions imposed by the Fund. Subsidies were withdrawn, and prices of fuel, gas, and electricity were raised. In June of that year, the 9 percent cap on the maximum lending rate was removed, and the central bank’s policy rate was increased. As a result, bank loan interest rates began to climb, while private investment declined. The government also adopted austerity measures, reducing public spending and shrinking the size of the Bangladesh Bank’s Export Development Fund (EDF). Although these initiatives were introduced in the name of economic reform, they narrowed employment opportunities and pushed youth unemployment higher.

Based on data from the Bangladesh Bureau of Statistics (BBS) and the International Labour Organization (ILO), the German-based data provider Statista analyzed the unemployment situation among Bangladesh’s youth. According to Statista, the youth unemployment rate in Bangladesh stood at 11.59 percent in 2019. The rate rose to 13.29 percent in 2020 amid the global COVID-19 pandemic. It then declined steadily in 2021, 2022, and 2023. However, unemployment among youth began to rise again in 2024, increasing from 10.9 percent in 2023 to 11.46 percent in 2024. In this data, Statista classified youth as those between the ages of 15 and 29.

Pakistan also experienced negative effects on employment and income distribution as a result of IMF loans. Sri Lanka, the island nation in South Asia, faced a similar situation. In Kenya, too, meeting the IMF’s loan conditions led to reduced budgets, shrinking employment opportunities, and a rise in poverty and income inequality.

Following the COVID-19 pandemic, the international human rights organization Human Rights Watch published a report analyzing the impact of IMF loan programs. The report, titled “Bandage on a Bullet Wound: IMF Social Spending Floors and the Covid-19 Pandemic,” found that 33 countries under IMF loan programs had implemented measures such as cutting public spending, freezing recruitment, and reducing or suspending salaries. These actions had negative consequences for employment and social services in those countries.

Anwar-ul Alam Chowdhury (Parvez), president of the Bangladesh Chamber of Industries (BCI), said the government was “sacrificing everything to please the IMF.” Speaking to Bonik Barta, he said, “Whenever we go to the government with a demand, we’re told it cannot be done because the IMF has objected. The business community urged the government to lower corporate taxes. But the government refused, saying the IMF disapproved. In this difficult time, the government has reduced export subsidies, and when we protested, it said the reduction was required to meet IMF conditions. The loan default period has been shortened to three months, which is turning many businesses into defaulters, again with the IMF being cited as the reason. The government has increased bank loan interest rates and reduced both the size and lending limit of the EDF, all in the name of IMF conditions. If everything is dictated by the IMF, then what is the government’s role?”

Explaining the situation further, the business leader said, “There is no private investment happening. Job creation has come to a complete halt. Many industries have closed down, increasing unemployment. Imports of capital machinery have stalled. The negative effects of this economic stagnation will become visible in two to three years. Who will revive the economy then? The IMF won’t come to save any enterprise. When a factory shuts down now because of a lack of working capital or loan defaults, even if funds are provided two years later, it will no longer help.”

Employment in Bangladesh primarily depends on government recruitment, development projects, and private sector investment. However, at present, new investment in the country has virtually come to a halt. With industrial and business investments falling short of expectations, the overall economy has slowed significantly. Apart from routine activities, the government is not initiating any new development projects. Similarly, the private sector is not undertaking any new industrial ventures or expansion initiatives. As a result, demand for loans from the banking sector has dropped to almost zero, and no new companies are being listed on the stock market.

An analysis of central bank data shows that in June this year, private sector credit growth hit its lowest level in history. By July 2025, the situation worsened further, with private sector loan growth turning negative. In June, the final month of FY 2024–25, private sector credit stood at BDT 17.47 trillion. By July, the first month of FY 2025–26, the figure dropped to BDT 17.42 trillion—signaling that credit growth not only stagnated but turned negative, with total outstanding loans declining by BDT 50.53 billion.

To contain high inflation, the central bank has maintained a contractionary monetary policy for three consecutive fiscal years. In FY 2024-25, the target for private sector credit growth was set at 9.8 percent, but the banking sector fell far short of that goal. Actual private sector credit growth for that fiscal year was only 6.5 percent.

The General Economics Division (GED) of the Planning Commission described the current level of private sector credit growth as historically low. In its September Economic Update and Outlook, GED noted that the growth rate—well below the central bank’s target—reflects a combination of business disinterest, high interest rates for bank loans, political and economic uncertainty, and the cautious lending approach adopted by banks.

The GED report also identified sluggish development spending as one of the weakest points of the current economy. In the first two months (July–August) of the new fiscal year, implementation of the Annual Development Programme (ADP) stood at only 2.39 percent—lower than the 2.57 percent achieved in the same period of FY 2024-25. Although there was slight improvement in August 2025, overall progress remained unsatisfactory. Structural bottlenecks in project implementation persist. Meanwhile, the government is also struggling to meet its revenue targets. In August, revenue collection totaled BDT 271.62 billion against a target of BDT 308.89 billion, resulting in a shortfall of BDT 37.27 billion for the month. However, compared with the same period in 2024, revenue collection grew by 17.63 percent—a sign of moderate progress, though GED cautioned that meeting the annual target remains a distant goal.

Economist Dr. Fahmida Khatun told Bonik Barta, “There is no denying that the outcomes of IMF loan programs have not been good in many countries. But it is also important to consider when a country turns to the IMF. We see that countries usually depend on IMF loans only when they have no other options left.”

Dr. Fahmida Khatun, who serves as the Executive Director of the Center for Policy Dialogue (CPD), added, “The IMF imposes many conditions for its loans. However, there is also room for negotiation over those conditions. The success of such negotiations depends on the government’s capacity. Countries like Bangladesh usually do not have much leverage in this regard. In the past, Bangladesh had instances of exiting IMF programs without fulfilling the conditions after taking loans. But now we are having to meet all the conditions. If India, instead of Bangladesh, were taking this loan from the IMF, perhaps the terms would not have been the same.”

She further said, “To rein in high inflation, the interest rate needed to be raised, even if only temporarily. This should not be viewed merely as a condition imposed by the IMF. The stagnation in private investment and lack of job creation cannot be blamed solely on high interest rates. High interest is only one factor in the cost of doing business. Many other issues are involved—law and order, bribery, corruption, bureaucratic complexities, infrastructural limitations, port mismanagement, shortage of skilled manpower, and the prices of fuel and electricity. Without addressing these problems, it will be extremely difficult to boost investment and generate employment.”

According to the Bangladesh Bureau of Statistics (BBS) Labor Force Survey, the total number of unemployed people in the country stood at 2.58 million in 2022. Among them, 2.15 million were young people aged between 15 and 29. In 2023, the total number of unemployed was 2.46 million, with 1.94 million unemployed youth. As of 2024, the total unemployed population has reached 2.62 million, including 2 million unemployed youth.

In a research paper titled “How Successful Are International Monetary Fund Loan Programs,” three Johns Hopkins University researchers—Kavish Hajarnavis, Dhruv Mahajan, and Hyunwoo Roh—evaluated the effectiveness of IMF loan programs between 2000 and 2010. The study analyzed how IMF loans affected unemployment, inflation, real GDP, exports, and the ratio of government debt in borrowing countries.

The study compared 155 countries that had received IMF loans with 27 countries that had not, though both groups had faced similar economic crises. The findings showed that unemployment in loan-recipient countries rose by 5.8 percent, while it fell by 7 percent in countries that did not take IMF loans. Inflation in IMF-supported countries dropped by an average of 70 percent—the only positive indicator. GDP in IMF loan-recipient countries increased by 58 percent, compared with a 76 percent rise in non-recipient countries. Exports rose by 72 percent in countries that took IMF loans, while they grew by 99 percent in those that did not. Government debt in IMF-supported countries rose by 1 percent, while it fell by 16 percent in non-recipient countries.

However, Dr. Zahid Hussain, former Lead Economist at the World Bank’s Dhaka office, does not believe that IMF loan programs have caused rising unemployment in Bangladesh. He told Bonik Barta, “We have been seeing this trend since 2016–17. We can describe it as a middle-income trap. The interest rate was capped for more than two years, but even then, investment did not increase, which could have led to job creation. So, it is not necessarily true that higher interest rates will discourage investment. Factors like the ease of doing business and structural reforms play key roles in increasing investment and employment. When investors see that a favorable business environment exists and that they can earn attractive returns, they will be encouraged to invest.”

In January 2023, the IMF Executive Board approved a $4.7 billion loan package for Bangladesh. Of that amount, $3.3 billion was to come from the Extended Credit Facility (ECF) and Extended Fund Facility (EFF), while $1.4 billion was to be provided under the Resilience and Sustainability Facility (RSF). Later, in December 2024, Bangladesh requested additional funding under the program. In response, the IMF board approved a total of $4.1 billion under the ECF and EFF. Including $1.4 billion under the RSF, the total loan amount rose to $5.5 billion—an increase of around $800 million.

Initially, the IMF loan program was scheduled to run until May 2026. However, due to the expanded loan size, the IMF board decided to extend the ECF and EFF program by another six months. In June 2025, the IMF disbursed $1.33 billion to Bangladesh as the fourth and fifth loan tranches under the program. Before releasing the sixth tranche, an IMF mission will visit Bangladesh on October 29 to review the implementation of policy conditions and reforms.