Staff Reporter :
Bangladesh has long struggled with a stubbornly low revenue-to-GDP ratio-stuck near 8% for decades-pushing the government to roll out key reforms to boost revenue collection and ensure fiscal discipline.
This persistent shortfall has long hampered the government’s ability to invest in infrastructure, education, and healthcare on the scale needed to meet its development goals.
In response, the government has rolled out a series of fiscal reforms aimed at improving revenue mobilisation and strengthening overall economic governance.
A major step in this direction is the separation of tax policy from tax administration-a move designed to foster fair, efficient, and growth-oriented taxation.
The Finance Division’s latest Medium-Term Macroeconomic Policy Statement outlines legislative measures already underway to support this transformation.
At the core of the reform agenda is the Medium- and Long-Term Revenue Strategy (MLTRS), adopted by the National Board of Revenue (NBR), which targets a gradual increase in the revenue-to-GDP ratio to 10.5percent by FY2035-a modest ambition considering the country’s growing needs.
Over the medium term, revenue performance is projected to improve slightly.
The ratio is expected to grow from 8.18percent of GDP in FY24 to 9.09percent by FY28. For FY25, however, the target has been revised downward from 9.66percent to 9.17percent due to ongoing domestic challenges, subdued import activity, tax exemptions on essential goods, and tight fiscal policies.
The national budget for FY2025-26 sets a revenue collection goal of Tk5.64 lakh crore, equivalent to 9percent of GDP. Of this, the NBR is tasked with collecting Tk4.99 lakh crore.
Major components include Tk1.82 lakh crore from income, profits, and capital gains taxes, Tk1.88 lakh crore from VAT, and Tk68,244 crore from supplementary taxes. Import and export duties, excise taxes, and other smaller sources will make up the rest.
Beyond the NBR, an additional Tk19,000 crore is expected from non-NBR sources, such as land tax, vehicle fees, and narcotics and liquor duties. Non-tax revenue is projected at Tk46,000 crore, including dividends, interest income, service fees, and administrative charges.
Still, Bangladesh’s overall public expenditure remains among the lowest globally, at just 12-13percent of GDP in recent years.
The original FY25 budget projected spending at 14.24percent of GDP, but this was later trimmed to 13.18percent amid weak revenue flows and inflationary pressures.
A significant contributor to this cut is the reduction in Annual Development Programme (ADP) spending-from 4.73percent to 3.83percent of GDP-highlighting the government’s focus on fiscal discipline by deferring less essential projects.
Total expenditure is forecasted to stay around 12.76percent of GDP by FY28, with ADP spending remaining relatively restrained. On the bright side, the country’s debt-to-GDP ratio remains under 40percent, and the fiscal deficit is being carefully managed.
For FY25, the deficit has been revised down to 4percent of GDP and is expected to fall further to 3.73percent by FY28, consistent with the government’s contractionary fiscal stance.
Additionally, net foreign financing is set to decline from 1.93percent of GDP in FY25 to 1.24percent by FY28, reflecting a deliberate shift away from heavy external borrowing.
Together, these reforms represent a cautious but determined effort to stabilize the economy, enhance revenue generation, and prepare Bangladesh for sustainable long-term growth.
