NBR facing 128.6% growth target in last 2 months of FY26 due to massive revenue shortfall: CPD

Revenue mobilisation has emerged as a severe bottleneck for fiscal management in Bangladesh, as the National Board of Revenue (NBR) recorded a massive tax collection shortfall of Tk1,04,533 crore during the July-April period of the FY2025-26.

According to the latest data, the revenue collector managed to secure a 10.6% growth in tax collection during these 10 months, a figure that falls drastically short of the revised July-April collection target of Tk4,31,461 crore.

The development comes amidst warnings from the Centre for Policy Dialogue (CPD), which described the government's annual revenue targets as "operationally unrealistic" during the presentation of its third reading of the Independent Review of Bangladesh's Development (IRBD) in Dhaka today (4 June).

The report, titled "State of the Bangladesh Economy in FY2025-26: Multidimensional Challenges during the Transition Period," was presented by CPD Executive Director Fahmida Khatun, who said recent developments reflect a mixed picture of resilience and vulnerability.

The widening deficit highlights a sharp deceleration in the state's fiscal trajectory. Ministry of Finance data reveals that total revenue collection posted a modest 6.9% growth during the July-March period of FY26, marking a considerable decline from the 7.9% growth recorded during the corresponding period of the previous fiscal year.

To achieve the government's ambitious annual revenue mobilisation growth rate target of 29.3%, the country would now require an improbable 84.6% growth during the remaining April-June period of the current fiscal. Furthermore, looking specifically at NBR tax collection, CPD says that meeting the full-year growth target of 34.5% would require an almost impossible expansion of 128.6% in the final months of the fiscal year.

CPD noted that closing this fiscal gap within the remaining timeframe represents a highly unlikely prospect, casting serious doubt over whether the upcoming International Monetary Fund (IMF) revenue conditionalities can be met by the government.

Broader systemic slowdowns across the domestic economy have compounded the current revenue mobilisation shortfall.

Sluggish ADP suppresses revenue velocity

The sluggish implementation of the Annual Development Programme (ADP) -- which stood at just 35.4% during the July-April period compared to the historical eight-year average of 49.8% -- alongside a general downturn in overall economic activity, has severely suppressed tax collection velocity, according to a related CPD report.

This collection slowdown occurred despite a brief surge in revenue driven by the enhanced collection of personal income tax, value-added tax (VAT), and supplementary duties at both the local and import levels, which had initially pushed early growth above the 6.2% baseline seen in FY25.

To finance the resulting budgetary deficits, the government has been forced to rely heavily on banking sources, with state bank borrowing climbing sharply during the July-March period.

"An increasing budget deficit remains a concern for fiscal management. Financing the budget deficit relied heavily on bank borrowing, as data show a sharp increase in borrowing form banking sources during the July-March period of FY2026," the CPD report added.

According to the think tank, the fiscal strain is further strained by critical data deficiencies and stalling institutional reforms within the state apparatus.

CPD analysis notes that the timely availability of public finance data remains a major constraining factor, with the finance ministry's reporting lagging significantly behind alternative sources like the NBR, the Bangladesh Bank, and the Implementation Monitoring and Evaluation Division (IMED).

Lack of holistic congruency in data

"While these alternative institutional channels offer timelier reporting, they lack the structural accuracy and holistic congruency provided by the ministry, forcing current fiscal analyses to rely on fragmented reporting frameworks," states CPD.

On the structural front, while the introduction of mandatory electronic filing for personal income tax returns represents a step forward for tax administration reform, broader institutional restructuring remains uneven.

The separation of the Revenue Policy Division and the Revenue Management Division is yet to be operationalised, and limited progress in implementing the Tax Expenditure Management Policy Framework continues to hamper transparency, accountability, and efficiency within the fiscal system.