The International Monetary Fund (IMF) is pressuring the Bangladeshi government to increase revenue collection by Tk 57,000 crore in the next fiscal year through reduced tax exemptions and higher tax rates.
Despite the National Board of Revenue (NBR) introducing unexpected tax hikes in January this year—projected to yield Tk 12,000 crore in extra revenue—the IMF now demands a much larger target to be met in the upcoming fiscal year, according to a report by The Business Standard (TBS).
NBR officials warn that failure to meet this target may jeopardize the disbursement of the IMF’s fourth loan installment, which is already delayed, along with the fifth installment scheduled for later this year.
An anonymous senior NBR official told the media that the impact of January’s tax hikes has not yet stabilized, and removing all tax exemptions at once is not feasible. “Some exemptions, especially in income tax, could be withdrawn, but even that may not ensure the expected revenue growth,” he said.
Another NBR source emphasized that simply increasing tax rates will not be enough. “We also need to curb tax evasion, expand the tax net, and improve automation to enhance voluntary taxpayer compliance,” the official added.
Former NBR chairman Muhammad Abdul Mazid cautioned that pursuing the IMF’s revenue goals aggressively could threaten Bangladesh’s economic stability. “Raising taxes or cutting exemptions alone won’t be enough to collect such a large amount,” he said, pointing to the negative outcomes faced by other countries that strictly followed IMF conditions.
Former World Bank chief economist for Dhaka, Dr. Zahid Hussain, also warned that a stalled IMF loan could lead other donors like the World Bank and ADB to reassess their budget support for Bangladesh.
In early 2023, Bangladesh signed a $4.7 billion loan agreement with the IMF that included over 30 reform conditions, one of which was to raise the revenue-to-GDP ratio by 0.5% annually—a goal yet to be achieved.
Even with the January tax hikes, revenue collection has fallen short of expectations. Disagreements over some of the central bank’s policy measures have further delayed the fourth installment of the IMF loan.
Amid this scenario, an IMF delegation is scheduled to arrive in Dhaka on April 5 to assess the progress of Bangladesh’s economic reforms. The team will meet with the finance advisor and hold discussions with NBR officials the following day.
LND/BG
