Over the past decade, Bangladesh’s government has witnessed a surge in borrowing to finance its national budgets due to inadequate revenue collection. In the fiscal year 2012-13, taxes covered 74% of the government’s total expenditure of Tk 174,013 crore, with domestic and foreign borrowing accounting for 22% and 4%, respectively. However, by 2021-22, revenue generation only contributed 65% to actual expenditure, while borrowing from domestic and foreign sources rose to 35%.
The government plans to rely on borrowing to cover 34% of its expenses in 2023-24, mainly from the domestic banking system. Fiscal deficit as a percentage of GDP increased from 3.7% in FY19 to 5.1% in FY22. Revenue growth averaged 10% annually between FY2017 and FY2023, with the tax-to-GDP ratio remaining among the lowest globally. The government’s borrowing decisions, both from commercial banks and external sources, have implications for private sector credit growth and inflation. Experts urge careful scrutiny of foreign loans and the implementation of feasible projects to mitigate the challenges and maintain macroeconomic stability.
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