10-month revenue growth plunges to five-year low amid NBR crisis

Highlights

• Average revenue collection growth typically exceeds 14%
• But in first 10 months of FY25 sees mere 3.24% growth
• It falls short of its target by a staggering 38%
• Covid-hit FY20 saw unusual 1.96% degrowth 

Bangladesh is set to face its most significant revenue deficit in five years, since the onset of the Covid-19 pandemic, with growth in revenue collection hitting its lowest since the fiscal year 2019-20. 

Officials at the National Board of Revenue (NBR) have attributed the grim picture to the deadlock triggered by the protest by officials against a government move to split the NBR.

According to data from the NBR, revenue collection increased by a mere 3.24% during the July-April period of the current FY25, marking the slowest growth since the 2019-20 fiscal year. During the ten-month period, the revenue collection fell short of its target by a staggering 38%.

NBR officials said over the past five decades, the average revenue collection growth for the NBR has typically exceeded 14%. The only exception was the Covid-hit FY20, which saw an unusual degrowth of 1.96%. In contrast, the most recent FY24 recorded a growth of 15.44%.

A senior NBR official, on condition of anonymity, told TBS, "Revenue targets are typically higher in May and July. However, due to the ongoing protests by officials, revenue collection in May is expected to take a significant hit." As a result, he added, there is a strong possibility that this fiscal year will see the lowest growth since FY20.

Revenue collection has been hampered since the beginning of the current fiscal year due to student-led uprisings, the subsequent fall of the Sheikh Hasina government, and a deterioration in law and order. While revenue collection saw a slight recovery from December, it experienced a setback in April.

NBR officials are particularly worried that the protests over the potential dissolution of the NBR could severely impact May's revenue collection. With officials poised to virtually halt import-export activities from today, stakeholders believe that a prolonged crisis will lead to further negative impacts on revenue collection and significant losses for businesses and trade.

According to NBR data, in the first 10 months of FY25, only Tk287,257 crore was collected against a target of Tk358,732 crore. This represents a deficit of Tk71,476 crore compared to the target for the period. 

The initial target for the current fiscal year was Tk4,80,000 crore, which was later revised down to Tk4,63,500 crore. Despite a growth of 7.40% in April, the collection for the month still fell short of its target by Tk5,810 crore.

Meanwhile, projections from the Centre for Policy Dialogue (CPD), a research organisation, indicate that the total revenue shortfall for the current fiscal year could reach Tk1,05,000 crore. 

Towfiqul Islam Khan, a senior research fellow at CPD, told TBS, "Due to the NBR officials' protests in May, the revenue collection gap is likely to widen further and will be even lower than the inflation rate."

He warned that if the anticipated growth in revenue collection is not achieved, the tax-to-GDP ratio could decline further, potentially increasing pressure from the International Monetary Fund (IMF).