Bangladesh lags behind LDC-graduating peers in public spending and revenue mobilisation efforts

Bangladesh's fiscal deficit is projected to remain above 4 percent of GDP through 2026, as revenue growth continues to fall short of expanding public expenditure.

Despite rising development needs, the country allocates a significantly smaller share of its economic output to public spending than its South and Southeast Asian peers. In 2025, Bangladesh's public expenditure stood at just 13.0 percent of GDP, compared to 23.4 percent in Nepal, 18.4 percent in Lao PDR, and 17.9 percent in Cambodia. The trend is expected to persist in 2026, with Bangladesh projected to spend 14.0 percent of GDP.

At the same time, Bangladesh's revenue mobilisation remains among the weakest in the region. Government revenue is forecast to rise to only 9.8 percent of GDP by 2026, well below levels seen in countries with comparable or even lower income levels.

Public debt is rising gradually but remains modest relative to regional norms. Bangladesh's debt-to-GDP ratio is expected to reach 40.7 percent in 2026, up from 37.9 percent in 2022. Economists view the trajectory as broadly sustainable, though they caution that further borrowing capacity may depend on tangible improvements in tax collection and the efficiency of public investment.