Pension automation and E-challan automation systems have been introduced with the help of iBAS++ software. This system has played a significant role in simplifying the budget management process
The government of Bangladesh has set ambitious goals for its fiscal policy, as outlined in the Medium-Term Macroeconomic Policy Statement for 2023-24 to 2025-26. One of the primary objectives is to collect total revenue amounting to 11.2 per cent of the Gross Domestic Product (GDP) by the end of the fiscal year 2025-26. To achieve this, the government is making significant efforts to enhance revenue collection and stimulate economic growth.
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Bangladesh has consistently maintained an expansionary fiscal stance, which involves running a moderate budget deficit, usually around 5.0 per cent of GDP. This approach has been adopted to foster economic growth, reduce poverty, and improve social outcomes
The Macroeconomic Policy Statement underscores the pivotal role of capital accumulation in driving development. Consequently, the government is actively working to promote both private and public investments as integral components of its strategy to achieve its objectives.
Govt’s Aims to Stimulate Growth
The outbreak of the COVID-19 pandemic necessitated a shift in government priorities. The government’s focus shifted to saving lives while simultaneously preserving living standards. This strategy involved retaining jobs, providing income support, maintaining active supply chains, reviving the rural economy, and ensuring food supply. The government increased spending and implemented comprehensive recovery programs consisting of twenty-eight stimulus packages. These efforts were successful, leading to a swift return to a high growth trajectory.
The recent Russia-Ukraine war has introduced considerable risks to the economy. In response, the government is pursuing a policy to rationalize public expenditure to stimulate economic growth by inducing domestic productivity growth. The government is committed to maintaining a budget deficit of around 5.0 per cent of GDP over the medium term while addressing these new challenges.
Historically, Bangladesh has maintained a comparatively low level of public expenditure in relation to its GDP, largely due to constraints in revenue collection and budget execution processes. In response to this, the government has initiated strategic measures aimed at expanding public spending. The objective is to elevate public expenditure to approximately 16.2 percent of GDP by the fiscal year 2026.
Challenge of Fast-Paced GDP Growth
This rapid pace of GDP growth in Bangladesh has posed a unique challenge. While economic growth is a positive aspect, it can make it challenging to increase the tax-GDP ratio. The measures undertaken by the government are expected to gradually improve revenue collection by increasing both the tax volume and the number of taxpayers.
The statement highlights the core objectives of the public expenditure policy. These objectives aim to stimulate private investment by building infrastructure and improving the business climate, creating employment opportunities, supporting the low-income population through social safety net programs, and reducing poverty by ensuring efficient wealth redistribution. Ultimately, the goal is to achieve inclusive development.
Expanding Public Expenditure
The government is actively pursuing Public Financial Management (PFM) reforms to achieve these expenditure goals. These reforms encompass improving public service delivery, enhancing financial control of budget allocations, real-time monitoring of budget execution, and integrating recurrent and capital spending. The implementation of the PFM Action Plan (2018-23) is ongoing, and a revised PFM Reform Action Plan (2024-2028) has recently been formulated.
Pension automation systems
Under the PFM reforms, pension automation and E-challan automation systems have been introduced with the help of iBAS++ software. This system has played a significant role in simplifying the budget management process. Additionally, all beneficiary programs are being brought under the Government to Person (G2P) payment system with the help of the iBAS++ software, increasing transparency in government expenditure management.
Furthermore, all government allocations from government institutions, as well as semi-government, autonomous, and state-owned enterprises, are being integrated into the Treasury Single Account (TSA) through the iBAS++ system in the medium term.
In conclusion, Bangladesh’s fiscal strategy is evolving to meet the challenges of a rapidly growing economy and the need for increased revenue collection and public expenditure. The government’s proactive approach, coupled with ongoing reforms, demonstrates its commitment to achieving inclusive development and economic stability.
Conclusion
Bangladesh’s fiscal strategy, as outlined in the Medium-Term Macroeconomic Policy Statement for 2023-24 to 2025-26, is marked by ambitious goals aimed at collecting 11.2% of GDP in revenue by the end of the fiscal year 2025-26. The government is dedicated to achieving these objectives through enhanced revenue collection and measures to stimulate economic growth. The country has historically maintained an expansionary fiscal stance, focusing on moderate budget deficits to foster economic growth and improve social outcomes. All the efforts reflect the government’s commitment to inclusive development, economic stability, and adapting to the evolving challenges of a rapidly growing economy.
