[🇧🇩] Monitoring Bangladesh's Economy

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Bangladesh rake in $2.25b in remittances in first 24 days of May

Expatriate Bangladeshis have consistently sent over $2 billion in remittances each month since September, and that trend has continued into May. In the first 24 days of May, remittances totalled $2.25 billion, according to data released by Bangladesh Bank on Sunday. In April, Bangladesh recorded

thefinancialexpress.com.bd

Bangladesh rake in $2.25b in remittances in first 24 days of May

bdnews24.com
Published :
May 25, 2025 21:48
Updated :
May 25, 2025 21:48

Expatriate Bangladeshis have consistently sent over $2 billion in remittances each month since September, and that trend has continued into May.

In the first 24 days of May, remittances totalled $2.25 billion, according to data released by Bangladesh Bank on Sunday.

In April, Bangladesh recorded its second-highest monthly remittance inflow in history, just under $3 billion. The previous month, March, saw a record $3.29 billion in remittances ahead of Eid-ul-Fitr, the highest ever for a single month.

According to the central bank, the previous peak before that came in December 2024, when remittances reached $2.64 billion. By that measure, April’s figure is now the second highest on record.

With May’s total crossing the $2 billion mark, Bangladesh has now seen 10 consecutive months of monthly remittances exceeding that threshold.

However, May also brought worrying news regarding remittances.

Analysts have raised concerns over a proposed US law introduced by President Donald Trump, which seeks to impose a tax on money transfers from the US to other countries. If passed, it could have a negative impact on Bangladesh’s remittance inflows.

The bill proposes a 5 percent tax on all international money transfers from the US. It would apply not only to non-citizens residing in the US for work or business but also to those on H-1B or F-1 visas, and even to green card holders.

Senior officials at Bangladesh Bank and managing directors of several commercial banks fear that if the tax is enforced, remittances through formal banking channels will decline. Many US-based expatriates may then turn to informal channels like hundi, dealing a major blow to the country’s foreign reserves.

Speaking at a roundtable earlier this month, Bangladesh Bank Governor Ahsan H Mansur said the country’s reserves would grow only if remittance and export earnings increase. He expressed optimism that reserves would continue to rise in the coming months.

He also asserted that the value of the dollar would not be determined by foreign companies or institutions, but set domestically by Bangladesh itself.

Earlier this month, Bangladesh Bank allowed the exchange rate to be determined by market forces. The governor confirmed this move followed discussions with the IMF.​

 

[Saif]

Missing revenue target

When a set revenue target looks unachievable, the reasons may be either it is too lofty to achieve or inefficiency on the part of taxmen or some unavoidable setback encountered at some point of the fiscal period. In case of Bangladesh, the general trend of mismatch between the revenue target and th

thefinancialexpress.com.bd

Missing revenue target

Published :
May 26, 2025 23:52
Updated :
May 26, 2025 23:52

When a set revenue target looks unachievable, the reasons may be either it is too lofty to achieve or inefficiency on the part of taxmen or some unavoidable setback encountered at some point of the fiscal period. In case of Bangladesh, the general trend of mismatch between the revenue target and the actual earning is a combination of the first two. The fiscal year 2024-25 had also to bear the brunt of the third in the form of July-August uprising and its ripple effects throughout the year. If all this was not enough, the latest pen-down programme observed by the officials of the National Board of Revenue (NBR) following the ordinance on its bifurcation has proved to be the last straw on the camel's back. The consequence has been what it ought to be: by April, the government's revenue income will miss the downsized target by Tk 715 billion.

There was no guarantee that the tax department would have achieved the target if it did not go for the pen-down strike. But the disruption caused due to the protest programme, particularly at this late and crucial stage, is expected not only to miss the target by a bigger margin but may also decelerate the process of garnering revenue during the current and the final months of the outgoing financial year. Move to split the NBR was not only ill-timed but also the process of doing so caused dissent among the tax people. Sure enough, there was a need for reaching a consensus through extensive consultation with NBR officials before going for its bifurcation. Some experts have questioned the merit of placing the bifurcated organs of the NBR under the finance ministry because bureaucratic supervision will largely be responsible for compromising whatever autonomy the unified organisation enjoys. Evidently, such imposition of the decision could well be avoided and so too the self-inflicting harm. At a time when the country needs as much tax revenues as it can generate, smooth and better coordination was in demand.

Mobilisation of only Tk3.58 trillion in domestic revenue during the past 10 months of this fiscal and that too at a decelerated growth rate of 3.24 per cent compared to the previous fiscal still has a large gap to cover. Even the revenue officials have expressed their doubt that they cannot close the gap. This is certainly not good news for the interim government. In whichever form the NBR operates next until it is in power, it will have to carry the legacy of the past, this current fiscal year in particular.

At a time when the NBR was supposed to be invigorated to put in a robust performance in tax collection, any change in its organogram had to be brought about rationally and the timing of it had also to be perfect without negatively affecting its revenue mobilisation process. Taking care of the overriding need for clearing the augean stables was more important than any other programme. After all, the bottom line is to expand the tax net and eliminate the collusion between a segment of dishonest tax officials and tax payers that either unlawfully exempts some from submitting tax return or helps pay a radically sliced amount in place of the actual tax return they needed to submit.​

 

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Enhanced domestic revenue mobilisation for economic resilience

The upcoming budget for FY2025-26 is very significant for Bangladesh from several perspectives. This is the first budget after the fall of the ousted government, and the interim government aims to use the budget as a platform for structural reform to remedy the economic woes Bangladesh has been suf

thefinancialexpress.com.bd

Enhanced domestic revenue mobilisation for economic resilience

TIM Nurul Kabir
Published :
May 26, 2025 23:35
Updated :
May 26, 2025 23:35

The upcoming budget for FY2025-26 is very significant for Bangladesh from several perspectives. This is the first budget after the fall of the ousted government, and the interim government aims to use the budget as a platform for structural reform to remedy the economic woes Bangladesh has been suffering from, particularly during the past few years. As Bangladesh is scheduled to graduate from the Least Developed Country (LDC) status in November 2026, the interim government also has the responsibility to speed up preparedness to meet the post-LDC graduation economic challenges.

Fiscal policy is one of the most crucial areas of government economic policy that has the potential of affecting economic stability and boosting growth. With the economy slowed by high inflation and low revenue mobilisation, the impending exit from the LDC club poses major economic challenges for Bangladesh, which need to be addressed immediately and effectively. The interim government is set to unveil a contractionary national budget with the target of reducing spending and implementing reforms to boost domestic revenue to narrow the budget deficit.

Because of low level of revenue mobilisation, the size of Bangladesh's government sector is one of the lowest in the world, at 13-14 per cent of GDP. The tax-GDP ratio which is a key indicator of revenue mobilisation efficiency has remained stagnant at around 8 per cent, which is much lower than neighbouring Nepal-- 23.4 per cent and India-- 20 per cent. Despite this low level of public expenditure, Bangladesh has maintained a budget deficit of approximately 5 per cent of GDP, financed primarily by external and internal borrowings. Growing reliance on borrowing has led to a rising debt burden.

Bangladesh's debt-to-GDP ratio rose to 36.30 per cent in FY2024 from 32.41 per cent in FY2021, due to substantial expansion in both domestic and external borrowing. According to statistics, 14.24 per cent of the national budget for FY25 was allocated solely for interest payments on government debt.

Borrowing from banking sources increased sharply to BDT 5.97 trillion in FY2024, up from BDT 3.34 trillion in FY2021, signaling crowding-out risks. External debt stock surged to BDT 8.12 trillion in FY2024, compared to BDT 4.20 trillion in FY2021. External debt-to-GDP ratio increased to 22.60 per cent in FY2024 raising external vulnerability. A significant portion of the national budget goes to debt servicing to deal with the enormous debt burden causing significant loss of fiscal space on account of mandatory interest payments.

Amid rising repayment obligations and declining foreign exchange reserves, major nondiscretionary expenditures grew faster than the increase in revenue, which caused the fiscal space to shrink. Besides interest payments on foreign and domestic public debt, other major nondiscretionary outlays include pay and allowances for government employees; pensions and gratuities; and subsidy for energy, agriculture and some other sectors.

As per available data, total nondiscretionary spending on pays, allowances, pensions and gratuities accounted for more than 43 per cent of the revenue in FY23. Extensive subsidies allocated to support various sectors account for almost one fourth of the total tax revenue of the government becoming burdensome for the budget.

According to the debt bulletin report of the finance division of the Ministry of Finance, government expenditure on interest payments account for one-sixth of the national budget. Bangladesh's total debt-to-GDP ratio was 33.02 per cent in 2023, with domestic debt at 19.0 per cent and external debt at 14.04 per cent. Total debt-to-GDP ratio rose to 36.30 per cent in FY2024 and is further projected to rise to around 40.26 per cent in 2025, reflecting higher fiscal pressures.

Bangladesh's public debt in terms of GDP is no doubt among the lowest globally. A total debt-to-GDP ratio of more than 40 per cent is significantly lower than the IMF threshold of 55 per cent. However, it is government revenue, and not GDP, that determines the capacity to pay public debt. In terms of debt-to-revenue measure, Bangladesh's public debt is globally one of the highest.

According to estimates, more than Tk. 980 billion of domestic credit was extended by Bangladesh Bank (BB) to the budget in FY2023. This surge in the borrowing from the central bank triggered corresponding surge in inflation to almost 10 per cent in 2023. In FY2024, the BB provided Tk. 36,176.5 crore domestic credit to the budget during the period of July to February.

As significant portion of government expenses is allocated to paying interest on its debts, a major share of public expenditure is consumed for paying interest, putting constraint on fiscal flexibility. This constraint on fiscal flexibility could worsen as tighter monetary policies as a short term measure to curb high inflation would drive up interest rates on treasury bills and bonds.

Enhanced domestic revenue mobilisation is essential for reducing fiscal deficits, providing funds for public investments and ensuring economic resilience. Low tax collection constrains the ability of the government to invest in development projects. As noted, operating expenses dominated budget execution in FY2023, comprising 64 per cent of total actual spending, while development expenditure accounted for only 36 per cent.

To enhance domestic revenue mobilisation for strengthening fiscal foundations and supporting sustainable growth, two major steps have been taken recently by the interim government. The Medium and Long-Term Revenue Strategy (MLTRS) of the National Board of Revenue (NBR) was unveiled in April, setting a target of raising Bangladesh's tax-GDP ratio to 10.5 per cent by FY2034-35.

Defining medium term as the period from FY2025-26 to FY2029-30 and the long term from FY2030-31 to FY2034-35, the MLTRS aims to implement tax administration reforms to enhance efficiency, transparency and accountability in revenue collection. Upcoming reforms include expanding the tax base, simplifying the tax system, modernising tax infrastructure, enhancing voluntary compliance among taxpayers, and implementing structural changes.

In May, the interim government has issued the "Revenue Policy and Revenue Management Ordinance 2025", dissolving the NBR and replacing it with two new divisions under the finance ministry. In a move to modernise tax administration and boost revenue collection, the government will establish separate Revenue Policy Division and Revenue Management Division. The Policy Division will design tax laws, set rates, and oversee international tax treaties, while the Revenue Management Division will handle enforcement, audits, and compliance for income tax, VAT, and customs.

Bangladesh's total tax revenue consists of about two-thirds indirect tax and one-third direct tax. While indirect taxes are easier to collect and contribute significantly to government revenue, these taxes are levied on goods and services consumed by all individuals regardless of income level, which places a disproportionate financial burden on the lower-income households. Proportionately higher dependence on indirect taxes contributes to widening income inequality in the society.

In contrast, direct taxes such as personal income tax and corporate tax play a crucial role in ensuring fairer tax burden distribution. Countries in the Asia region that have successfully increased their overall tax revenue, including India, Thailand, China and South Korea have steadily moved away from dependence on indirect taxes, towards greater reliance on direct taxes.

As Bangladesh stands at a critical juncture in its development trajectory, and strives to attract and retain greater volume of the much required foreign direct investment (FDI), a stable, transparent, and ethical fiscal environment is critical for economic resilience and sustainable growth. A comprehensive approach is required to address structural weaknesses in the taxation system and ensure efficiency in domestic revenue mobilisation. Tax policy changes are an ongoing exercise, for which active and ongoing stakeholder consultations imperative to ensure resilient growth of industries, trade, investment and the national economy.

T.I.M. Nurul Kabir, business, technology and policy analyst, is Executive Director, Foreign Investors Chamber of Commerce and Industries (FICCI)​