The Fiscal Landscape of Bangladesh
An Interactive Analysis of Revenue and Expenditure
Fiscal Health at a Glance
This section provides a high-level snapshot of Bangladesh's current fiscal situation. Key performance indicators (KPIs) highlight the most critical figures from the recent fiscal years, offering a quick understanding of the primary challenges: a low tax-to-GDP ratio and a persistent budget deficit. The chart visualizes the fundamental structure of government revenue.
Tax-to-GDP Ratio (FY2023)
8.2%
Among the lowest globally, constraining public investment.
FY2025-26 Budget Deficit
3.6%
Reflects fiscal restraint, but pressures remain.
FY2025-26 Budget Size
Tk 7.9T
First-ever reduction from the previous year, signaling austerity.
Revenue Composition
Tax-to-GDP Ratio Trend
Revenue Deep Dive
This section explores the sources of Bangladesh's government income. The primary challenge is an over-reliance on indirect taxes (like VAT), which disproportionately affect lower-income citizens. Interact with the chart to see the breakdown and explore the cards to understand the different types of revenue and the challenges in collecting them.
Tax Revenue: Direct vs. Indirect
Indirect taxes form the bulk of revenue, raising equity concerns.
Direct Taxes (~33%)
Levied on income and wealth. Includes Personal Income Tax (progressive rates) and Corporate Income Tax (rates from 10% to 45%). Prone to evasion and significant revenue loss from loopholes and incentives.
Indirect Taxes (~70%)
Levied on goods and services. Includes Value Added Tax (VAT) at a standard 15%, Customs Duties on imports, and Supplementary Duties on luxury goods. This creates a regressive system, burdening the poor more.
Non-Tax Revenue & Aid
Includes profits from state-owned enterprises, fees, and foreign grants. Collection faces challenges from inefficient state enterprises and bureaucratic hurdles. Foreign aid helps bridge the budget deficit.
Expenditure Analysis
Here we examine how the government allocates its funds. The chart shows the breakdown of the FY2025-26 budget. A significant portion goes to social safety nets and public administration, but critical sectors like education and health remain chronically underfunded compared to international standards, posing long-term risks to development.
Key Expenditure Allocations (FY2025-26 Budget)
Underfunding in Critical Sectors
Despite their importance for long-term growth, education and health receive allocations far below international recommendations.
Rising Debt Servicing Costs
Interest payments on public debt are a growing and prioritized part of recurrent expenditure. Chronic revenue shortfalls necessitate increased borrowing, creating a cycle where more funds are diverted to paying interest instead of being invested in development projects.
Core Fiscal Challenges
Bangladesh's fiscal management is hampered by deep-rooted structural problems. This section highlights the key issues, from the vicious cycle of revenue shortfalls and borrowing to the impact of inflation and administrative weaknesses. Click on each challenge to learn more about its impact on the economy.
The government consistently fails to meet revenue targets, forcing it to cut development spending ("budget compression") and borrow more. This increases public debt, and a larger share of future revenue must be used to pay interest, creating a self-perpetuating cycle that limits fiscal space for essential investments.
Massive revenue is lost through tax evasion, corporate loopholes, and an informal sector that employs ~85% of the workforce but remains largely outside the tax net. A lack of political will to tackle powerful vested interests and bureaucratic hurdles for small businesses perpetuate this problem.
Persistent high inflation, especially in food prices, erodes the purchasing power of citizens and pushes more people into poverty. This is worsened by a balance of payments deficit and declining foreign exchange reserves, which weaken the currency and increase import costs.
The tax administration (NBR) lacks modernization and efficiency. Recent abrupt reforms caused institutional instability and revenue loss. Furthermore, issues of accountability, transparency, and corruption in public spending mean that allocated funds often don't reach their intended beneficiaries or achieve their goals effectively.
Reforms & Strategic Outlook
Addressing these fiscal challenges requires comprehensive and sustained reforms. This section outlines the ongoing efforts, often guided by international partners like the IMF, and provides strategic recommendations for building a more resilient and equitable fiscal future for Bangladesh.
Key Recommendations
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Enhance Revenue: Broaden the tax base to include the informal sector, close corporate loopholes, and shift focus from regressive indirect taxes to progressive direct taxes.
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Improve Spending: Rationalize inefficient subsidies, enhance public service efficiency, and prioritize investment in human capital (education & health).
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Strengthen Governance: Modernize tax administration through automation (iBAS++), improve transparency, and implement robust anti-corruption measures.
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Build Trust: Demonstrate effective use of tax revenue in public services to encourage voluntary compliance and ensure reforms are collaborative, not disruptive.
Timeline of PFM Reforms
1989-90: CORBEC
Committee on Reforms in Budgeting and Expenditure Control initiated early PFM reform efforts.
1990s-2000s: RIBEC, FMRP, SPEMP
A series of programs aimed at improving different aspects of public financial management.
Ongoing: SPFMS & iBAS++
The current program focuses on enabling service delivery, with the iBAS++ system automating budget and accounting functions.
2025: NBR Restructuring
IMF-backed reform to split the NBR, aimed at improving efficiency but met with internal resistance and disruption.
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