ECONOMY
Key Challenges in Economy
Underperforming Tax-to-GDP Ratio
Bangladesh’s tax-to-GDP ratio (7.3% in FY23) lags behind regional and global averages, with an ambitious target of 11.2% by FY26. Low tax compliance and limited digital infrastructure hinder tax system modernization and efficiency. System interoperability issues and public adaptation to digital tax processes also remain significant obstacles.
High Youth Unemployment
High youth unemployment, particularly among graduates (27.8% in 2022), reflects a severe skills mismatch and insufficient job creation. Weak industry-academia collaboration limits the workforce's alignment with market needs. Inadequate access to skill development programs and funding for training infrastructure exacerbate the issue.
Export Diversification
Heavy reliance on RMG (81.8% of exports in FY23) and limited non-RMG export contributions (15.42% in FY23). Low R&D investment (0.03% of GDP) limits innovation and competitive advantage in global markets. Lack of robust trade policies and quality assurance systems restricts access to new markets, especially post-LDC graduation in 2026.
Reform matrix
Policy Objectives
Recommended Activities for Policymakers
Outcomes
Potential Impact
Key Stakeholders
Recommended Activities for Policymakers
Digitize the tax collection system with enhanced interoperability
Simplify tax return processes to improve compliance
Launch public awareness campaigns on digital tax processes
Upgrade digital infrastructure
Outcomes
Improved transparency and efficiency in tax collection
Higher tax compliance.
Increased revenue generation
Potential Impact
Progressing towards the target Tax-to-GDP ratio of 11.2% by FY26, strengthening fiscal sustainability, and funding development priorities
Key Stakeholders
MoF, NBR
Recommended Activities for Policymakers
Strengthen industry-academia collaboration through incentives for partnerships
Expand access to skill development and digital transformation programs.
Align education curricula with market needs
Invest in infrastructure for training
Outcomes
Reduced skills mismatch
Higher youth employment rates
Increased productivity and innovation in the labor market
Potential Impact
Maximizing demographic dividend benefits, fostering economic growth, and reducing the unemployment burden
Key Stakeholders
Secondary and Higher Education Division, Ministry of Education, Ministry of Labour and Employment
Recommended Activities for Policymakers
Develop broader export policies targeting non-RMG sectors
Increase R&D investment through subsidies and incentives
Strengthen quality assurance and compliance mechanisms.
Facilitate FTAs with key trading partners
Outcomes
Higher value-added exports
Reduced dependency on RMG
Enhanced global competitiveness
Greater market access post-LDC graduation
Potential Impact
Sustainable economic growth, increased job creation, and higher per capita income by expanding export opportunities
Key Stakeholders
MCCI, EPB, Ministry of Commerce
Policy Area scorecard
Priority Sector
Policy Area (e.g. Education, Environment, healthcare, Law and Governance, Economy, etc.)
Policy Objective
The reform goal of the policy
Activity
Activities undertaken to achieve the reform goal
key Stakeholder
Stakeholders mainly responsible for implementation reform activities
Current status of the indicator
End Target
Desired status of the indicator
Term (years)
Time frame to achieve the goal (e.g. 3 years, 5 years, etc.)
Year 1 target
Progress target in year 1 (FY2025/26)
Year 2 target
Progress target in year 2 (FY2026/27)
Year 3 target
Progress target in year 3 (FY2027/28)
Score
Performance score in each year Year 1: Year 2: Year 3:
Recommendation
Recommendations for improvements or corrective actions Year 1: Year 2: Year 3: