Mapping major economic faultlines

Bangladesh is currently passing through a period of severe economic stress. A number of structural problems have persisted for years and already inflicted deep wounds in the economy. As a result, macroeconomic instability is gradually intensifying. In June, the government is expected to announce the National Budget for the fiscal year 2026-27. Before unveiling the budget, a comprehensive diagnosis of the economy is essential so that the core problems can be identified accurately. Once the problems are picked out properly, sketching a roadmap for solutions becomes significantly easier. Otherwise, if the wheels of the economy continue moving in the current direction and style, the country risks falling into a deep economic abyss in the near future.

The greatest weakness of our economy lies in revenue collection. Government expenditure is increasing across multiple sectors, while revenue is not rising at the same pace. Again, there is enormous pressure for development. People aspire for better infrastructure, better services, and a higher standard of living. Structural development increases production, creates employment opportunities, raises income, and improves overall quality of life.
For years Bangladesh is heavily depending on borrowed funds to manage the imbalances of income and expenditure. Now the country is burdened with public debt amounting to roughly Tk 18-19 trillion (18-19 lakh crore), while annual interest payments have already crossed Tk 1.34 trillion (1.34 lakh crore). This accounts for nearly 20 per cent of the national budget, and the figure continues to rise steadily. Therefore, there is simply no alternative to increasing revenue generation from domestic sources. The tax-to-GDP ratio currently stands at around 6.6-7.0 per cent, one of the lowest in South Asia. Even neighbouring South Asian countries such as India, Pakistan, Nepal, Sri Lanka, and the Maldives maintain significantly higher tax-to-GDP ratios. Therefore, increasing the tax base is indispensable for resolving the country's current economic challenges.
To achieve this, the first priority must be strengthening the capacity of the National Board of Revenue which has institutional weaknesses. According to an estimate by the Bangladesh Bureau of Statistics, millions of salaried individuals in Bangladesh earn monthly incomes of Tk 50,000 or more, yet only a fraction of them are within the tax net. On the other hand, it is widely understood that a large section of business owners do not properly pay VAT or taxes.
Tax evasion has become normalized across various professional groups including salaried employees, bureaucrats, businesspeople, journalists, lawyers, politicians, doctors, and engineers. Very few people speak openly against it, partly because many who criticize the system themselves lack transparency in their own tax affairs. In essence, the present tax administration must be comprehensively restructured. The tax net must be expanded, tax rates and collection procedures must be made more rational and user-friendly, and the honest taxpayers should receive proper recognition. Beyond just VIP and CIP cardholders, large-taxpayers should also be formally acknowledged and they should be offered certain priority public services.
The second major problem of the economy is the stagnation in investment. Both domestic and foreign investments have remained sluggish for nearly two years. Without investment, new employment opportunities cannot be created, production does not expand, incomes do not rise, and the economy gradually loses momentum. The major barriers to foreign investment in Bangladesh are well known to policymakers. Bureaucratic red tape remains a harsh reality. Without major reforms in the administrative system, this obstacle cannot be reduced to an acceptable level.
Infrastructure deficiencies also continue to be severe. Persistent shortages of gas and electricity are seriously undermining industrial and commercial growth. Moreover, Bangladesh's poor ranking in the Ease of Doing Business index discourages many foreign investors from entering the market.
Thirdly, country's financial sector is in a deeply fragile condition. The crisis in the banking sector is no longer a secret. Some of the leasing companies are struggling for survival. Removing life support equipment could trigger their collapse.
The government through Bangladesh Bank has repeatedly attempted to rescue these institutions. Mergers and acquisitions alone are unlikely to solve the problem because there is little chance of achieving any real synergy. In reality, combining two or more weak institutions simply creates a larger weak institution. When weakness merges with weakness, the outcome is often decay rather than recovery. Perhaps stronger institutions partnering with weaker ones could yield better outcomes, but that too requires strong governance and political will.
If depositors' confidence cannot be restored, the consequences for the broader economy could become devastating. So, both short-term and long-term strategies are urgently needed to recover the country's massive volume of non-performing loans.
Massive looting has occurred within the banking sector, and enormous sums of money have reportedly been smuggled abroad. In many cases, public services cannot be obtained without bribery. The health and education sectors are also heavily affected by corruption. In many developed countries, institutional systems are designed in such a way that opportunities for corruption are extremely limited. Even when corruption occurs, offenders are usually investigated, prosecuted, and punished.
Unless Bangladesh can free itself from these entrenched problems, achieving the country's desired development will remain impossible, and common people will continue to suffer unnecessarily and unfortunately.
The writer is a banker and columnist.
kzamanabbl@gmail.com