Bangladesh’s interim government is seeking a $500-million bailout from the Asian Development Bank (ADB) to stabilize the country’s banking sector, which has been struggling with rising non-performing loans (NPLs) and financial irregularities.
Officials from the Economic Relations Division (ERD) confirmed that negotiations with the ADB have been completed, and the funds are expected to be disbursed next month.
The financial support aims to facilitate ongoing reforms in the banking sector, addressing weaknesses caused by past lending malpractices.
An ERD official stated that the proposal is set for approval at the ADB board meeting in April, after which a loan agreement will be signed. The funds are part of the “Banking-Sector Reform Policy-Based Lending” program, with a second tranche of $500 million contingent on the success of initial reforms.
Bangladesh’s banking sector has faced mounting challenges, with NPLs reaching 20.2% of total outstanding loans as of December 2023, according to central bank data. Several commercial banks have been categorized as financially vulnerable due to high levels of bad loans, deposit shortfalls, and operational inefficiencies.
The ADB has already suggested reform measures that Bangladesh must implement to secure budgetary support. In December 2023, the lender approved $600 million under the “Strengthening Economic Management and Governance Programme” to assist the country’s transition from least-developed country (LDC) status.
