Bangladesh's revenue-GDP ratio to hit double-digits in FY27: IMF

The International Monetary Fund (IMF) projects that Bangladesh will achieve a double-digit revenue-to-GDP ratio in the fiscal 2026-27, a milestone that neighbouring economies such as India, Nepal, and Pakistan have already reached.

In its latest edition of the Fiscal Monitor report released on 17 April, the multilateral lender forecasted that the country's revenue-to-GDP ratio will reach 9.3% in FY25 and 9.9% in FY26 before hitting 10% in FY27.

The government's revenues are expected to improve in the ongoing fiscal year, as the collection may reach 8.8% of gross domestic product compared to an estimated 8.3% a year ago. The ratio was 8.9% in FY22 and 9.4% in FY21.

Zahid Hussain, a former lead economist at the World Bank's Dhaka office, told The Business Standard, "The loan programme with the IMF includes terms and conditions related to tax expenditure, tax policy, income tax, and so on. A huge focus was put on the fiscal sector. Moreover, there are talks of introducing a 15% VAT on metro rail services in the next budget, which will add to tax collection."

He added, "If such tax reform programmes can be implemented successfully, our revenue-to-GDP ratio can grow by around 0.5% every year, and reach the IMF's double-digit forecast of 10%. However, it is still just a dream for us."

Meanwhile, among South Asian economies, Bangladesh's revenue-GDP ratio was considerably lower than that of India and Nepal in FY23. Both countries achieved an estimated double-digit revenue-to-GDP ratio, with 20.2% and 19.3% of GDP, respectively.

Meanwhile, Pakistan's government revenue was 11.4% of GDP.

The report mentioned, "Tax revenues should keep up with spending over time. Emerging markets and developing economies have a significant scope to increase tax revenues by upgrading tax systems, expanding tax bases, and enhancing institutional capacity."

"This could also help pay for strategic public investments needed to facilitate the diffusion of green and digital technologies."

"A risk-based, credible fiscal framework could help guide the process to rebuild fiscal space and reduce debt vulnerabilities," reads the report.