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REVENUE MOBILISATION: TRENDS AND CHALLENGES

MONTHLY BANGLADESH ECONOMIC UPDATE, NOVEMBER, 2015

MEU-November-2015The Bangladesh Economic Update November 2015 reveals that declining rate of growth in total revenue collection since FY 2011-12 together with failure to achieve the potential of higher revenue mobilisation is likely to shrink development financing. Urging for increasing strength and effectiveness of the tax administration, the Unnayan Onneshan suggests that the government must administer its fiscal management in a way that would broaden the taxpayers’ base on the one hand and ensure the provision of necessary services to the citizens in return for their payment of tax on the other.

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External Sector: Recent Trends and Challenges

Bangladesh Economic Upadate, October 2015 

MEU Oct 2015The current issue of Bangladesh Economic Update attempts to understand the current status of external sector against the backdrop of trade imbalance, negative balance in the account of service for a long time, declining rate of growth in remittance inflow, unsatisfactory inflow of Foreign Direct Investment (FDI), and large gap between the commitment and disbursement of foreign aid in the country. The Update reveals that imbalance in the current account of FY 2014-15 compared to that of FY 2013-14 is likely to exert pressure on country’s balance of payments and thus on the trend in external sector. Overall external balance is showing positive balance because of inflow of one or two items in a huge amount, but decrease in remittance and export of manpower, increasing deficit in service and trade balance are likely to impede the growth rate of the economy. Inflows of remittance become negative in the last Fiscal Year (FY) for the first time within ten years mainly because of the decline in labour migration in major markets like Saudi Arabia and UAE. This declinig inflow of remitance is likely to exert adverse impact on rural economy since consumption and expenditure of people living in rural areas are largely contingent upon remittance sent by their household members living aborad.

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Debt and Deficit: Trends and Challenges

Bangladesh Economic Upadate, September 2015 

MEU September 2015The current issue of the Bangladesh Economic Update analysing the current trends in deficit and debt reveals that increasing per capita debt burden, high debt as percentage of gross domestic product (GDP) and large debt service payment lowering the capacity of government to increase development expenditure are poised to impede the economic growth and increase intergenerational debt burden in the future. Deficit as percentage of GDP is increasing which is not that alarming level but swelling every year can be menacing for the economic growth. The expenditure – both the development and non-development expenditure – is increasing but collection of revenue is not at desirable level to cover the expenditure. In order to meet up this gap, debt from domestic and external sources is mandatory. Debt is, however, common for both the developed and developing economies but success of a country depends on prudent use and efficient management of debt. In this regard, financing and managing the deficit in a best possible way becomes a challenge for the government. Debt may be considered as a fiscal stimulus which has a multiplier effect on economy if it is used for productive purpose otherwise the debt make the problem worse (Leech, 2012). The per capita debt burden of Bangladesh has been mounting rapidly since FY 2009-10, and debt as a share of GDP is high. A large amount of money is paid every year as a principle and interest to service the domestic and foreign debt which is decreasing the net asset of the country.

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Revenue Mobilisation: Recent Trends

Bangladesh Economic Upadate, August 2015 

MEU August 2015The current issue of the Bangladesh Economic update attempts to assess the state of revenue collection against the backdrop of the declining rate of growth in collection of total revenue in recent periods. The Update also examines the contribution of different sources to the total collection of revenue and analyses the pattern of expenditure, deficit, and cost of deficit financing. Revenue has fallen short of its target in previous two consecutive years where economic situation was comparatively good. So, considering the historical trend, it can be predicted that the shortfall will persist affecting the trajectory of growth of the economy. Some structural problems are also responsible for increasing pressure on revenue collection. Tax –GDP ratio is very low. The tax base in Bangladesh is undoubtedly narrow. The wide opportunities of evading and avoiding tax along with structural weakness in the system and sporadic political turbulence have added further difficulties to this situation. A huge amount of capital is illegally flown out from country every year which is a big blow for the economy as it means lost investments and revenue income for the government. Adequate revenue collection propels the growth of a country by providing adequate fund to meet the expenditure and decrease the dependency on aid. To achieve this goal government sets ambitious fiscal targets of revenue collection every year and has continuously been failing to achieve the target in recent years.

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Targets Hanging in the Balance

A Rapid Assessment of National Budget 2015-16 

MEU June 2015In view of the current economic structure of Bangladesh, allocation of resources must be channeled efficiently into the productive sectors in order for the economy to get higher returns in terms of expanded productive capacity and resultant increased gross domestic product (GDP). Despite commendable progress in achieving growth in GDP, it is considered that the country has been missing the opportunities to capitalise on its resources and potentials to embark upon rising as a middle-income country by 2021. The causes of missing opportunities are, however, more political than economic. The characteristic of the national budgets – long on targets, short in reality – is mainly due to the lack of political will in the country. In recent years, the low implementation status of the national budgets has further accentuated the lack of political will induced shortfall in achieving targeted rate of economic growth in the country. The current national budget is tabled against the backdrop of three major economic challenges – shortfall in the achievement of economic growth vis-à-vis the target, low implementation of development expenditure, and lack of business confidence induced declining private investment.

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