The World Bank's latest report, South Asia Development Update: Taxing Times, paints a sobering picture for the region's economic trajectory. Bangladesh, one of the region's fastest-growing economies in the past decade, is expected to see its GDP growth slow significantly to just 3.3 per cent in the 2024-25 fiscal year. While a modest recovery to 4.9 per cent is projected for the following year, the reduced forecast reflects deeper concerns-both domestic and global.
This sharp slowdown is not unique to Bangladesh. Across South Asia, the World Bank has revised growth projections downward, forecasting a regional growth rate of 5.8 per cent for 2025, 0.4 percentage points lower than its October forecast. Although growth could rebound to 6.1 per cent in 2026, the immediate trend highlights growing vulnerabilities-political instability, financial strain, and a highly uncertain global economic environment.
The pressing question now is: how can South Asia, and Bangladesh in particular, navigate this turbulent landscape?
The World Bank's answer is clear: strengthen domestic revenue collection. Despite having tax rates that are not significantly lower than global averages, South Asian countries underperform in tax collection. From 2019 to 2023, government revenues in the region averaged just 18 per cent of GDP, far below the 24 per cent average in other developing countries. This gap is not just a technical problem-it's a structural issue that limits governments' ability to invest in critical sectors such as education, healthcare, and infrastructure, and respond effectively to economic shocks.
Bangladesh's case is emblematic. The country is grappling with political uncertainty and rising financial pressures, which are undermining investor confidence and slowing growth. Without a robust fiscal foundation, the ability to weather these challenges-and to stimulate the economy through public investment-is severely constrained.
It's not just about collecting more taxes, but collecting them more fairly and efficiently. Tax reform must focus on broadening the base, reducing evasion, and simplifying procedures. At the same time, governments must ensure that new revenues are transparently and effectively used to promote inclusive growth.
As Martin Raiser, the World Bank's Vice President for South Asia, aptly noted, now is the time to "open up trade, modernize the agricultural sector, and activate the private sector." These structural reforms, coupled with better revenue mobilization, can unlock the region's potential and create sustainable, inclusive growth.
South Asia stands at a critical juncture. The current slowdown is a wake-up call-not just to manage short-term challenges but to build long-term resilience. The path forward is clear; what remains is the political will to follow it.
