Bangladesh is registered by the UN as one of the world’s least developed countries. Although poverty rates have been reduced substantially over the last 20 years, by 2022, over 18 per cent of Bangladeshis were still counted as living in poverty and over 5 per cent were considered as living in extreme poverty. Meanwhile, income inequality is high and on the rise.
For more information see the summary report.
After the 1980s and 1990s debt crisis, Bangladesh managed to stabilise its external debt stock, particularly during the two decades between 1997 and 2016. External debt levels have been increasing both in absolute terms and in relative terms since 2016. Despite the steady debt increase, according to the IMF, Bangladesh is currently at a low risk of debt distress. External public debt to Gross Domestic Product (GDP) ratios remain below 20 per cent, but together with domestic debt, total public debt in 2023 was at 39.8 per cent of GDP, with the IMF projections indicating a further increase up to 43.3 per cent in 2029. The majority of public debt accumulated over the last decade is domestic and denominated in local currency.
While Bangladesh had been in a relatively safe zone in terms of debt payments, at least up until the outbreak of the Covid-19 pandemic, since 2020 debt servicing has increased substantially and debt is therefore becoming a rising concern. In 2023, the debt service to revenue ratio, including both domestic and external debt, reached 72.82 per cent, up from 61.83 per cent in 2021. Furthermore, in 2023, debt service was 43.54 per cent of Bangladesh’s public expenditure. In comparison, the Low-Income Countries Debt Sustainability Methodology of the IMF and World Bank assesses that such countries are able to sustainably carry their debt when the ratio of debt servicing to public expenditure is within the range of 14-23 per cent.
The domestic revenue mobilisation of Bangladesh is quite low. For the fiscal year 2020, the tax revenue amounted to 10.2 per cent of GDP, while the average for the Asia Pacific region was almost twice as high (19.1% of GDP for 2020). For 2019, the tax revenue of Bangladesh was as low as 9 per cent of GDP.
In terms of the source of tax revenue, Bangladesh relies heavily on consumption tax (value added taxes/goods and services tax), which made up 33 per cent of the tax revenue in 2020, while corporate income tax made up less than half of that (16%) and personal income tax even less (11%).
In the report State of Tax Justice 2023, Tax Justice Network has estimated that cross-border tax abuse is costing Bangladesh a total of US$396.9 million annually, corresponding to over 30 per cent of the country’s health expenditures. Of the tax loss in Bangladesh, it is estimated that the lion’s share – US$371 million – stems from corporate tax abuse and the remaining US$25.9 million from offshore wealth.
In November 2023, when the Africa Group tabled a resolution in favour of negotiating a UN Framework Convention on Tax, Bangladesh voted in favour of the resolution, and together with all other UN member states, Bangladesh is now participating in the process to develop Terms of Reference for such a convention.
