Bangladesh’s fiscal deficit is expected to remain above 4% of GDP through 2026, as revenue growth continues to trail behind rising public expenditure, according to new projections.

Despite mounting development needs, Bangladesh allocates a relatively small portion of its economic output to public spending compared to regional peers.

In 2025, public expenditure stood at just 13.0% of GDP, well below Nepal’s 23.4%, Lao PDR’s 18.4%, and Cambodia’s 17.9%. This gap is expected to persist, with Bangladesh projected to spend only 14.0% of its GDP in 2026.

The country’s revenue mobilisation remains among the lowest in South and Southeast Asia. Government revenue is forecast to rise to just 9.8% of GDP by 2026, reflecting persistent structural challenges in tax collection and fiscal administration.

Meanwhile, public debt is on a gradual upward path, reaching an estimated 40.7% of GDP in 2026, up from 37.9% in 2022. While still moderate by regional standards, economists warn that continued borrowing must be matched with stronger revenue performance and more efficient public investment.

Without significant reforms, the fiscal gap may limit Bangladesh’s ability to invest in infrastructure, health, and education, key areas needed to sustain its development trajectory.