The Finance Ministry has announced a series of reforms to strengthen Bangladesh's revenue mobilisation and uphold fiscal discipline, as the country continues to record one of the lowest revenue-to-GDP ratios globally; hovering around 8 percent for decades.
To address this long-standing challenge, the government has initiated the separation of tax policy from tax administration.
This structural change is aimed at ensuring the development of fair, efficient, and growth-friendly tax policies. As part of this reform, relevant legislation is currently being enacted.
According to Medium Term Macroeconomic Policy Statement issued by the Finance Division, the National Board of Revenue (NBR) has adopted a Medium and Long-Term Revenue Strategy (MLTRS), which sets a goal of raising the revenue-to-GDP ratio to 10.5 percent by the fiscal year 2035.
While modest, this target reflects the government’s commitment to gradually strengthening domestic resource mobilisation in light of increasing development demands.
The fiscal outlook over the medium term projects a steady increase in total revenue, from 8.18 percent of GDP in FY2023–24 to 9.09 percent by FY2027–28.
However, due to current economic pressures; such as slowing import demand, tax exemptions on essential commodities and contractionary fiscal measures, the revenue target for FY2024–25 has been revised downward to 9.17 percent of GDP from an earlier projection of 9.66 percent.
Non-tax revenue continues to remain limited and is projected to reach only 0.67 percent of GDP by FY2028. This is primarily due to low earnings from administrative fees, public services, and state-owned assets.
For the fiscal year 2025–26, the national budget has set a revenue collection target of Tk 5.64 lakh crore, which represents approximately 9 percent of GDP. Of this amount, Tk 4.99 lakh crore is expected to be generated by the NBR, while the remaining Tk 65,000 crore is projected to come from non-NBR sources.
From the NBR’s side, major revenue contributions will come from taxes on income, profits, and capital gains, expected to amount to Tk 1,82,001 crore. Value Added Tax (VAT) is projected at Tk 1,88,518 crore, followed by supplementary tax at Tk 68,244 crore, import duty at Tk 51,438 crore, export duty at Tk 78 crore, excise duty at Tk 6,091 crore, and Tk 2,630 crore from other tax segments.
From the non-NBR segment, an estimated Tk 19,000 crore will be collected, including revenue from stamp duty, land tax, vehicle tax, surcharge, and duties on narcotics and liquor. Non-tax revenue, totalling Tk 46,000 crore, is projected to come from dividends and profits of state-owned enterprises, interest, administrative and service fees, fines, rents, tolls, non-commercial sales, other receipts, and capital income.
Despite the persistent challenges in revenue generation, Bangladesh continues to maintain one of the lowest government expenditure-to-GDP ratios globally. Historically, public spending has stayed between 12 and 13 percent of GDP. In the original FY2025 budget, total expenditure was set at 14.24 percent of GDP but has since been revised downward to 13.18 percent. This adjustment is largely due to macroeconomic pressures such as underperforming revenue, high inflation, and vulnerabilities in the external sector.
A major contributor to the downward revision is the cut in Annual Development Programme (ADP) spending, which has been reduced from 4.73 percent to 3.83 percent of GDP. This reflects a conscious policy decision to postpone less essential capital projects, aiming to maintain fiscal discipline and contain inflation. In contrast, current expenditure has remained relatively stable, underscoring the government’s focus on sustaining essential public services and social safety programmes.
Looking ahead, total expenditure is expected to follow a modest growth path, reaching around 12.76 percent of GDP by FY2028. ADP expenditure is projected to remain constant at 3.83 percent of GDP during this period.
Bangladesh’s public debt, including General Provident Fund liabilities, remains below 40 percent of GDP. The fiscal deficit has consistently been kept under control, staying below 5 percent of GDP in recent years.
For FY2025, the overall deficit has been revised down to 4.0 percent of GDP, from 4.57 percent in the original budget. This reduction is primarily the result of curbing less urgent ADP spending. The deficit is forecast to decline further to 3.73 percent of GDP by FY2028, aligning with the government’s medium-term strategy of adopting a contractionary fiscal stance.
Additionally, net foreign financing is projected to decline from 1.93 percent of GDP in the revised FY2025 budget to 1.24 percent by FY2028. This trend reflects the government's focus on reducing dependency on external borrowing and limiting the use of non-concessional loans.
SH
