Bangladesh is entering a critical reform phase ahead of its scheduled graduation from the Least Developed Country (LDC) category, according to the latest report of the Asian Development Bank (ADB), which warns that weak governance, fiscal vulnerabilities and institutional fragmentation could undermine the country's long-term economic ambitions.
In a report titled "Bangladesh at a Crossroads of Reforms", the Manila-based lender said the country must implement broad institutional and macro-fiscal reforms to sustain growth momentum and manage post-LDC transition challenges.
The report comes as the newly elected government pursues an ambitious target of transforming Bangladesh into a US$1.0 trillion economy by 2034 through investment-led and employment-intensive growth, aiming to reduce reliance on a "debt-driven expansion" model, create 10 million jobs and raise foreign direct investment (FDI) inflows from 0.45 per cent to 2.5 per cent of GDP.
However, the ADB said Bangladesh's macroeconomic and governance challenges remain significant, highlighting several structural weaknesses that require urgent attention.
The ADB flagged multiple interlinked constraints across fiscal, institutional and governance fronts, including a persistently low tax-to-GDP ratio of around 7.5 per cent and weak revenue administration marked by overlapping mandates and fragmented tax structures.
Rising debt vulnerability, with public and publicly guaranteed debt reaching nearly 41 per cent of GDP in FY2025, is another key challenge, the report warned.
The report also pointed to fragmented debt management across agencies without a unified database, limiting effective fiscal oversight and risk monitoring.
Public financial management weaknesses persist, with gaps between planning and budgeting processes, while the Integrated Budget and Accounting System (iBAS++) has yet to fully capture arrears, contingent liabilities and financial commitments.
On the state-owned enterprise (SOE) front, performance has deteriorated sharply, with returns on equity falling by 88 per cent and returns on assets by 78 per cent between 2018 and 2022, reflecting declining efficiency and rising fiscal risks.
The governance framework for SOEs remains outdated and fragmented, with overlapping oversight responsibilities between the finance ministry and line ministries creating structural conflicts of interest.
Institutional accountability is also under strain, the ADB said, as the Office of the Comptroller and Auditor General (OCAG) continues to face limited financial and administrative independence, weakening audit effectiveness.
The Anti-Corruption Commission (ACC) remains vulnerable to bureaucratic influence, while public trust has weakened, reflected in a 29 per cent decline in complaints between 2019 and 2023, the report added.
The ADB outlined a comprehensive reform roadmap prioritising restructuring the National Board of Revenue (NBR) by separating tax policy and administration functions, improving domestic resource mobilisation and enhancing international tax cooperation to curb illicit financial flows.
It also called for the establishment of an integrated public debt management office supported by a unified debt database, alongside implementation of a Medium-Term Fiscal Framework (MTFF) and Medium-Term Budget Framework (MTBF) across ministries to improve fiscal discipline and predictability.
In public financial management, it recommended upgrading iBAS++ and expanding electronic government procurement (e-GP) systems to enhance transparency, accountability and expenditure control.
To strengthen oversight institutions, the ADB urged greater financial independence and capacity enhancement for the OCAG and ACC, along with improved disclosure standards and audit quality.
It also proposed simplifying CSO registration through a single-window system to facilitate civic engagement and transparency.
For state-owned enterprises, the report recommended introducing a comprehensive state ownership policy, enacting a dedicated SOE law and strengthening performance monitoring frameworks to reduce fiscal risks and improve operational efficiency.
"The success of these reforms will depend on sustained political commitment, transparency and stronger engagement with non-government stakeholders," the report observed.
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