Bangladesh continues to lag behind its South Asian peers in public spending, with government expenditure as a share of GDP among the lowest in the region—and globally—according to the Ministry of Finance’s latest Medium-Term Macroeconomic Policy Statement (MTMPS).

The document reveals that public expenditure may dip to 12.7% of GDP in FY26, down from a projected 13.2% in FY25, and hover around 12.8% in the medium term, despite growing development needs.

By contrast, public spending in Bhutan exceeds 25% of GDP, India is close to that mark, Nepal nears 20%, Pakistan is over 15% and Indonesia stands at 15%. The U.S. and Germany spend over 35% and 50% of GDP respectively.

A key limiting factor, the report notes, is the persistently low revenue-to-GDP ratio, stuck at around 8.0% for years, which constrains fiscal space and forces expenditure restraint.

Compounding the issue is Bangladesh’s de facto fiscal rule—a self-imposed budget deficit ceiling of 5.0% of GDP, curbing the government’s ability to scale up spending even when needed.

Despite the fiscal squeeze, the MTMPS says efficiency reforms are underway, including a “comprehensive review of ongoing projects” to ensure smarter allocation of limited resources.

Still, the report warns that without a major boost in revenue mobilisation, maintaining or increasing public investment will be difficult—posing long-term risks to Bangladesh’s economic ambitions.