Last update on: Wed Mar 12, 2025 08:29 AM
Revenue collection fell significantly short of the International Monetary Fund’s (IMF) target in the first six months of the current fiscal year, with the floor for the fourth instalment of an ongoing $4.7 billion loan programme proving too ambitious.
The government raised Tk 162,892 crore in total revenue, including from both National Board of Revenue (NBR) and non-NBR sources, according to finance ministry data, missing the IMF’s target to collect Tk 215,120 crore by Tk 52,228 crore.
Bangladesh needed to achieve 34 percent growth in tax collection to meet the goal set in the current fiscal year’s budget, meaning it was always going to be an uphill battle.
The revenue collection remained largely static compared to the Tk 162,262 crore recorded during the same period of the preceding year, reflecting sluggish growth.
According to finance ministry data, the NBR collected Tk 159,137 crore in the first six months of FY25, a marginal increase from the Tk 158,482 crore collected in the same period of the year prior.
However, the contribution from non-NBR sources declined slightly to Tk 3,755 crore from Tk 3,780 crore in the same period.
Although only around 50 percent of its non-NBR revenue collection target could be met last fiscal year, the Awami League government fixed an ambitious target for the current fiscal year before being ousted by a mass uprising in August last year.
The IMF was supposed to disburse the fourth instalment in February this year but deferred it to June, according to government officials.
A review mission from the IMF will visit Bangladesh next month.
Finance ministry officials said some prior actions required from the Bangladesh Bank and the NBR were not implemented, which resulted in the deferred disbursement. The prior actions were outlined by a review mission in December last year.
Until now, tax collection targets have not been included as a quantitative performance criterion (QPC), a mandatory benchmark that Bangladesh must meet to unlock IMF loan instalments.
However, during the December visit, the IMF mission indicated that they would make tax collection a QPC, increasing pressure on the government to strengthen revenue generation efforts.
QPCs are a kind of monitoring process of the IMF and if someone demands a waiver from the target, then they need the executive board’s approval.
As of now, it remains an indicative target, meaning any breach can be discussed and sorted out through talks between officials.
Former NBR chairman Muhammad Abdul Majid said the IMF made an ambitious target without taking reality into account.
“The government should not agree to such targets,” he said, adding that the government must increase tax collections.
He said the NBR itself is responsible for not expanding the revenue collection as they don’t want to encourage reforms.
Nasiruddin Ahmed, another former NBR chairman, criticised the IMF’s revenue target, arguing that it was not based on realistic assessments.
“The IMF target was based on unrealistic estimates, not reality,” he said.
Nasiruddin also pointed to “structural and policy problems” within the NBR that continue to hinder tax collection. Without full automation, he warned, the NBR cannot boost revenue collection effectively.
He further said that, given the existing inefficiencies in the tax system, the government should not have agreed to the IMF’s “ambitious revenue target in the first place”.
Following the visit in December, the IMF mission stressed the need to rationalise tax exemptions, improve compliance, and separate tax policy from tax administration to create a more efficient revenue collection system.
Despite previous commitments to improve tax compliance and expand the tax base, Bangladesh’s revenue collection remains stagnant, raising concerns about its ability to meet future fiscal targets.
Economists stress that a failure to implement these long-pending reforms could further complicate the country’s economic challenges, including high inflation, exchange rate volatility and external debt repayment pressures.