Revenue falls Tk26,000cr short of target in Q1

Infographic: TBS

Bangladesh's revenue collection in the first quarter of the current fiscal has fallen short by almost Tk26,000 crore and the outlook for improvement in the near term remains bleak, with global organisations downgrading Bangladesh's economic growth forecasts.

Experts have attributed this slowdown in revenue to the recent student protests, the fall of the Sheikh Hasina government, and subsequent political instability. 

In the first quarter of the current fiscal, the country's revenue collection fell short by Tk25,597 crore compared to the target, and by Tk4,585 crore when compared to the same period last year.

Moreover, the World Bank, which initially projected over 5% growth for Bangladesh this fiscal year, has now revised that down to 4%, closer to the pandemic-era levels.

Experts also mentioned that since there is a strong correlation between economic growth and revenue collection, it might take some time for the economy to stabilise.

Md Farid Uddin, a former NBR member, told The Business Standard, "The student-led protests in July and August, followed by political instability, disrupted revenue collection, which is evident in the current revenue situation."

"The country may need to wait until December for the economy to stabilise," he said, adding that until then, revenue collection may not meet expectations.

However, he mentioned that Bangladesh has secured financial support from global donor organizations, which could be utilised during the fiscal year. If the economy gains momentum in the second half, revenue collection could improve, he added.

Despite the ongoing instability, there have been signs of gradual recovery. 

According to NBR data, the collection for July stood at Tk20,269 crore, followed by Tk21,600 crore in August and Tk29,000 crore in September. NBR data shows that in the first quarter of FY25, import tax and value-added tax (VAT) collections dropped by more than 7% and 10%, respectively, compared to the same period in FY24. Over the same period, income tax performed better than both import tax and VAT.

Despite the country's unstable situation, economists have argued that revenue should have increased due to high inflation.

Professor Mustafizur Rahman, a distinguished fellow at the Center for Policy Dialogue (CPD), told TBS, "Although revenue collection was disrupted in July and August, there should have been growth during this period considering the high inflation."

"However, it is encouraging to see that the revenue collection situation improved last September," he added.

Experts also identified the decline in imports as a significant factor behind the revenue shortfall. Farid Uddin linked this drop to political instability and the ongoing dollar crisis. 

According to Bangladesh Bank's data, import payments (letter of credit settlements) fell by more than 13% in the first two months of FY25 compared to the same period last year.

In total, NBR collected Tk70,903 crore in the first quarter, well short of the Tk96,500 crore target. This represents a 6% drop compared to the same period last year, signaling ongoing challenges for the country's fiscal performance.