Bangladesh is entering a critical reform phase ahead of its scheduled graduation from the Least Developed Country (LDC) category, according to a new report by the Asian Development Bank (ADB), which highlights significant governance, fiscal, and institutional challenges that could affect the country’s long-term economic stability.
In its report titled “Bangladesh at a Crossroads of Reforms”, the Manila-based lender said the country must implement wide-ranging macroeconomic and institutional reforms to sustain growth and successfully manage the post-LDC transition. The ADB noted that Bangladesh’s ambition to become a US$1 trillion economy by 2034 will require stronger investment-led growth, improved governance, and reduced reliance on debt-driven expansion.
The report identified several structural weaknesses, including a persistently low tax-to-GDP ratio of around 7.5%, fragmented tax administration, and rising public debt levels that have reached nearly 41% of GDP. It also pointed to weaknesses in debt management, noting the absence of a unified database and limited coordination among agencies responsible for fiscal oversight.
Public financial management systems were also flagged as an area of concern, with gaps in budget execution and incomplete reporting of liabilities under the current integrated accounting system. The report further highlighted declining performance in state-owned enterprises, citing sharp drops in returns on assets and equity, alongside outdated governance structures and overlapping institutional responsibilities.
The ADB also raised concerns over institutional accountability, noting limited independence for oversight bodies and declining public trust in key governance institutions. It said corruption monitoring and audit effectiveness remain constrained by administrative and structural limitations.
To address these challenges, the report recommended a comprehensive reform agenda, including restructuring tax administration, improving domestic resource mobilisation, and strengthening international tax cooperation to reduce illicit financial flows. It also called for the creation of a unified public debt management office and the adoption of medium-term fiscal and budget frameworks to improve financial discipline.
Further recommendations included modernising public financial management systems, expanding digital procurement processes, and strengthening oversight institutions through improved independence and capacity building. The ADB also urged reforms in state-owned enterprise governance, including the introduction of a dedicated ownership policy and stronger performance monitoring systems.
The report stressed that successful implementation of these reforms will depend on sustained political commitment, stronger transparency measures, and broader engagement with stakeholders across society as Bangladesh prepares for its transition out of LDC status.
