Bangladesh’s tax authority, the National Board of Revenue (NBR), is facing mounting pressure to meet its revenue target for the 2024-25 fiscal year amid weakening consumer purchasing power, high inflation, and declining private and public investment.

According to NBR data, revenue collection in February grew by just 1% year-on-year. For the first eight months of FY25 (July-February), the increase stood at 1.76%, significantly lower than required to meet the fiscal target.

During this period, the NBR collected Tk 2218.17 billion, approximately 80% of its target of Tk 2800.59 billion.

With only four months left in the fiscal year, the NBR now faces the daunting task of collecting Tk 2416.83 billion to reach the revised target of Tk 4635 billion. Experts say this goal is highly ambitious, given the sluggish economic conditions and political uncertainty.

The weak revenue collection has intensified concerns about Bangladesh’s reliance on domestic borrowing to finance its budget as foreign funding declines and debt repayment obligations grow.

“Revenue mobilization has remained lukewarm, and this chronic underperformance is increasing our dependence on domestic borrowing to finance development expenditure,” said Ashikur Rahman, a senior economist at the Policy Research Institute (PRI) of Bangladesh.

Rahman warned that this rising reliance on domestic borrowing is pushing up interest payments and crowding out private investment. He also noted that the International Monetary Fund (IMF) expects improvements in tax revenue collection, and failure to meet targets could lead to tensions between the Ministry of Finance and the IMF.

Bangladesh Bank data shows that government borrowing from the banking sector increased by Tk 156.05 billion between July 1 and February 13, exceeding the borrowing rate for the same period last year.

The Centre for Policy Dialogue (CPD) projected earlier this week that for the NBR to meet its target, tax collection in the second half of FY25 would need to increase by 55.5%—a highly improbable scenario given the current trend. CPD estimates suggest a potential revenue shortfall of Tk 1050 billion by the end of the fiscal year.

One major contributor to the shortfall is the decline in customs revenue. Despite a moderate recovery in imports, overall import levels remain low. Data from Bangladesh Bank shows that total imports grew by 3.32% year-on-year to $38.11 billion in the July-January period.