Thinking The Unthinkable

NBR misses the revenue target, Taxing export maybe the solution perfect.

Latest NBR revenue collection data shows the collection for July falls short of the stated target by Tk 28.62 billion. VAT outshines others,but income tax and customs duty did not perform as anticipated. The shortfall came amid rising food inflation while international commodity market showing a downward trend.

It is hard to ascertain what caused the price of rice to rise amid record production. If there were [a producer] price index ,then we could see where the problem lies. I have argued about this here(See "Resume The Routine Work", published here on October 9,2024). Unfortunately, it is not available and neither govt nor the BBS shows any intention to launch it pretty soon.

Governor himself acknowledged that $35 billion was plundered from the banking system in the last 15 years. Unlike the USA, Bangladesh does not allow any bank to collapse. So an initiative is on to merge six trouble-ridden banks. Literally, govt is taking the bad managerial decision of the troubled banks upon its shoulder. Letting them go bankrupt would be more prudent solution: you made a wrong decision and you bear the consequences. Govt does not bail out petty businesses, why should it bail out politically motivated projects?

NBR is desperate to make new directives. One directive seeks bank account details of TIN holders. Tax deduction on bank deposits, balance at the end of June and interest earned are the information to be investigated in real time for online tax return. The new directive will discard the need for such proof as the whole thing will happen in real time. Instead of going after how much existing TIN holders earned, it is better to expand operation in other districts, particularly in border districts and real estate booming districts like Sylhet, Chattogram and Rajshahi. Recovering the stolen asset, as govt claimed it traced $3 billion worth of stolen asset abroad, will be another area. Next 4 months after election may see unexpected rise in revenue as new elected govt will assume office for 4 years. Many laundered assets will come back in disguise of FDI, export earnings and remittances. Late [Prof.] Nurul Islam did a remarkable research on this topic and highlighted the two way traffic of this stolen asset(see "Corruption,Its Control And Drivers Of Change: The Case Of Bangladesh",by Nurul Islam,BIDS)

If NBR is really eager to boost revenue, the most plausible way is to impose tax (at least 1%) on remittances and export as I explained in an earlier piece. Central bank's depreciation policy through forex intervention and reduction in reciprocal tariff made room for such taxation. Why not take the advantage while leaving the industry unscathed? Another area is to reimpose duty on sugar that generates ample revenue for the govt. It will bring domestic sugar on [a par] with imported sugar in terms of price. Standard & Poor's forecast says oil prices will be lower next year. So inflationary pressure will not be a concern.

Meeting the revenue target should focus on expansion of taxpayers' base, thinking the unthinkable ( taxing the remittances and export), sugar tax and stolen asset recovery. Hopefully ,post election period will bring the much needed optimism and make NBR's task much easier.

[Update: this piece is updated by me on August 21,2025; update includes link to references.]

Another Blow To Credit Ratings

Long-term credit outlook is in decline Hints that economy is not doing fine.

Recently credit rating agency Standard and Poor Global Ratings has lowered Bangladesh’s long-term outlook to negative in the wake of government’s inability to clear dollar payments to international clients¹. Earlier, Moody’s had downgraded Bangladesh’s credit rating. Back then, government labelled the move as geopolitical one. But Dubai and Singapore based private banks made strict loan conditions following the rating.

Earlier a news report divulged that Petrobangla, a public corporation for extracting and procurement of fuel and energy, is facing difficulty in clearing dues of foreign energy companies. A Singapore based company and Total Energies owe a total of $110 million to Petrobangla. In addition, Chevron owes $280 million². They threatened to stop furnishing gas if the dues are not cleared soon.

Bangladesh has not increased its capacity to extract more gas and oil and to refine crude oil. Even former Chinese envoy to Bangladesh in a press conference wondered why Bangladesh wanted to buy oil from China when it is a net importer of oil. Saudi government on several occasions proposed the government to set up a new refinery. Only recently BPC installed oil pipeline and storing facilities for crude oil in Moheshkhali , a tiny island off the coast of Chattogram.It will save the govt Taka 8 billion annually.

Prior to this latest incident of payment debacle in energy sector, government had earlier intervened to clear dues of $293 million to Chinese government for smooth operation of Payra thermal power plant. Rampal power plant had also gone through similar intervention.

Back in April, a news report said that Facebook’s Bangladeshi public relation firm decided to limit its operation of collecting ads for Facebook. In a letter addressed to its clients, the firm put the blame on acute dollar crisis and obstacles in repatriating the ad revenue to the USA.

It was not the first incident of dollar crisis faced by private firm. Earlier, news report also surfaced claiming private companies who had borrowed from foreign institutions face uphill task to pay back instalment and interest as most banks refused to sell dollar crossing some limit. At the end of December 2022,commercial borrowing stood at around $8 billion and total credit stood at around $92.7 billion.³

In the first two weeks of current fiscal year,government borrowed Taka 10 billion from the central bank by purchasing treasury bonds and bills,which is literally printing money and injecting into economy⁴.

Back in April, in a piece titled “Food Security Under Scanner”,I wrote: “Another thing I have recently noticed that this year alone govt has to pay Taka 1 trillion as interest payments. This means it has to compromise spending on other sectors or to print money to meet the debt obligation. As this is an election year,govt may also embark upon politically motivated development projects to unite the loyalists. Often the money may stem from printing more money. This will push up the price level further, depreciating Taka further and increasing the woes of consumers.” ⁵

There is no surprise in S&P's pessimistic rating. Telenor Asia's head in an interview to a local daily has made it clear winding down of their investment in Bangladesh hinges on political situation⁶. Beximco Group,which earlier took over the operations of Glaxosmithkline here,has offered Telenor to purchase all its shares if it departs from Bangladesh. According to a report by UNCTAD, investment on relocating factories from Occidental countries to Bangladesh was declined by 59% in 2022.

Fed's policy rate hike, rising inflation, tensed political atmosphere, huge debt obligation offer dismal picture in investment. In general, investors' confidence reflected in these recent ratings. More quickly we resolve our political differences ,earlier will be our economic recovery.

Notes And References

1. “S&P Lowers Bangladesh’s Outlook To Negative,Credit Rating Unchanged “,Jebun Nesa Alo,The Business Standard, July 25,2023. For more read at https://www.tbsnews.net/economy/sp-lowers-bangladeshs-outlook-negative-credit-rating-unchanged-671570
2. ”Dollar Er Obhabe Gaser Daam Bokeya,Ditey Hocchey Jorimana(Gas Bill Due Because Of Dollar Crisis,Fines Keep Rising)”,Daily Prothom Alo,July 25,2023.
3. “Rising Debt Says It All”,Rezaul Hoque,April 22,2023.https://hoquestake.blogspot.com https://hoquestake.blogspot.com/2023/04/rising-debt-says-it-all.html?m=1
4. “Record Poriman Taka Chhapiye Sorkar Ke Dichhey Kendriyo Bank(Central Bank Printed Record Money And Handed To Government) “,Rakib Hasnat,BBCBangla,July 23,2023. For more read at https://www.bbc.com/bengali/articles/c4nr8j9vjn4o
5. “Food Security Under Scanner “,Rezaul Hoque,April 07,2023.https://hoquestake.blogspot.com. For more read at https://hoquestake.blogspot.com/2023/04/food-security-under-scanner.html?m=1
6. “Rajnoitik Poristhitir Upor Nirvar Korchhey Bangladesh e Telenor Er Babshyaik Bhobishot(Telenor's Business Future Hinges On Political Situation) “,Bonikbarta, July 27,2023. For more read at https://tinyurl.com/2kymfpse