Weak institutions cost Bangladesh billions in tax revenue, says World Bank

The World Bank has stated that weak public institutions are hindering Bangladesh's economic growth and costing the country billions of dollars in lost tax revenue. Jean Pesme, the World Bank's country director for Bangladesh, made these remarks at the launch of the Strengthening Institutions for Transparency and Accountability (SITA) project in Dhaka. He emphasized that these issues are symptoms of deeper structural problems. According to the Bank's Country-Level Institutional Assessment and Review based on 2023 data, Bangladesh ranks in the bottom quartile among upper-middle-income countries in eight out of 13 institutional clusters. These areas include political institutions, social institutions, integrity, justice, human resource management, public finance, labor and social protection, and service delivery.

Bangladesh's tax-to-GDP ratio stood at only 6.9 percent in fiscal year 2024-25, which is less than half of the roughly 15 percent considered necessary to finance the country's development ambitions. Pesme noted that around 70 percent of government revenue comes from indirect taxes, reflecting a narrow and inequitable tax base. Public investment projects face average cost overruns of around 30 percent and implementation delays of about three years. Bangladesh ranks 116th among 137 countries in infrastructure quality. Weaknesses in procurement and public investment management undermine infrastructure outcomes and public service delivery.

Pesme described Bangladesh as being at an "inflection point," with economic growth slowing over the past three years, fiscal pressures mounting, job creation weakening, and external shocks exposing long-standing structural vulnerabilities. Poverty reduction has also slowed, with 8.9 percent of the population projected to live below the $3-a-day poverty line in 2025. He stated that the next game for Bangladesh will depend less on policies alone and much more on how effectively institutions can implement them and close the execution gap.

The World Bank official welcomed the government's decision to separate tax policymaking from tax administration, calling it an important step toward stronger accountability and taxpayer confidence. He noted that the FY27 budget's revenue and service delivery targets were ambitious but contingent on institutional capacity to deliver. He urged authorities to accelerate the rollout of digital tax systems at the NBR, improve data accessibility and timeliness at the BBS, strengthen project selection and monitoring, expand the electronic Government Procurement (e-GP) system, and fast-track audit reforms.

The SITA project, financed by a $250 million World Bank credit, aims to modernize five institutions: the National Board of Revenue (NBR), the Bangladesh Bureau of Statistics (BBS), the Bangladesh Public Procurement Authority (BPPA), the Office of the Comptroller and Auditor General, and the Planning Division. Successful implementation is expected to result in higher revenue collection, more efficient public spending, greater procurement transparency, and stronger public auditing. Pesme emphasized that the next 18 months are critical, as only early results will ensure credibility, public trust, and reform momentum.