A state that collects 7% of GDP in tax cannot pay for health — and Bangladeshi families are covering the bill

Introduction

Bangladesh’s tax base has not kept pace with its economy. The International Monetary Fund (IMF) reports that tax collections fell from 7.4% of GDP in FY24 to 6.9% in FY25, and describes the country’s fiscal revenues as “persistently low”.¹ The consequences show up most plainly in health, where the government spent only 0.31% of GDP in 2023 and households paid 79% of the national health bill directly.²³

0.31% of GDP

Domestic government health expenditure in Bangladesh, 2023 (WHO estimate), down from 0.51% in 2000.

This article follows the chain from taxes to the clinic: how little the state collects, how little of that reaches health, and who fills the gap. Health spending figures are WHO estimates published through the World Bank; tax figures are from the IMF.

A thin revenue base

On the World Bank’s measure of central government tax revenue, Bangladesh collected 7.6% of GDP in 2021, the latest year available. India reported 6.9% (2022), Sri Lanka 9.9% (2023), Bhutan 12.3% (2020), Nepal 13.9% (2023) and the Maldives 19.5% (2021).⁴ The years differ because countries report on different schedules, so the ranking is indicative.

Bangladesh’s own ratio has barely moved in two decades: 6.6% in 2001, a high of 9.0% in 2012, and 7.6% in 2021.⁴ The IMF’s more recent fiscal-year series, which uses a slightly different definition, shows 7.3% in FY23, 7.4% in FY24 and 6.9% in FY25.¹

The IMF attributes the FY25 shortfall of about 0.8% of GDP partly to one-off shocks, namely the July–August uprising and a strike by National Board of Revenue staff, but also to structural weaknesses: a narrow tax base, pervasive tax exemptions, low compliance and heavy reliance on indirect taxes.¹ It notes that a package of new measures adopted in the FY24 and FY25 budgets did not lift the ratio as expected, “largely” because of weak compliance.¹

The government’s own Medium- and Long-Term Revenue Strategy aims to reach a tax-to-GDP ratio of 10.5% by FY2034–35, as summarised in the IMF report.¹ The IMF projection, which assumes further reforms, has the ratio at 9.3% in FY27 and 10.4% by FY30.¹

Where the squeeze lands: health

Low revenue limits what any budget can finance. In 2023 the Bangladesh government spent 0.31% of GDP on health from domestic sources, against 1.30% in India, 1.24% in Sri Lanka, 1.93% in Nepal and 0.90% in Pakistan. Only Afghanistan, at 0.25%, was lower among the South Asian countries reported.³

Health also receives a small share of what the state does spend: 2.47% of general government expenditure in 2023, compared with 4.59% in India and 7.66% in Nepal.⁵ Total health spending from all sources, public and private, was 2.17% of GDP, or about US$53 per person in 2023, against US$85 in India and US$84 in Nepal.⁶⁷

The government’s share has been falling, not rising. Domestic government health spending was 0.51% of GDP in 2000 and 0.31% in 2023, with a dip after 2018.³ The IMF also notes that in FY25 “under-execution of capital and social spending” more than offset the revenue shortfall, as the government met its fiscal target through spending cuts.¹

Families fill the gap

When public money is scarce, the bill goes to patients. Out-of-pocket payments rose from 61.8% of current health expenditure in 2000 to 79.3% in 2023, the highest share among the South Asian countries compared here (India 43.9%, Nepal 59.4%, Sri Lanka 54.8%, Pakistan 52.9%).²⁸

The two series move in opposite directions, but the data do not on their own prove that one caused the other. Private clinics and pharmacies have also expanded, and rising incomes raise private demand. What the figures do show is that the health system’s financing now rests mainly on household budgets, a financing model that leaves families exposed when someone falls ill.

Education tells a similar story. Government spending on education was 2.03% of GDP in 2024 (UNESCO data), roughly where it was in 2000 (2.13%).⁹ Neither health nor education spending has grown with the economy.

What it will take

• Treat revenue as a health policy. The IMF’s central recommendation is to raise tax revenue to create fiscal space for social spending and investment.¹ Without it, any pledge to expand health coverage is unfunded.
• Broaden the base and improve compliance. The IMF points to narrowing VAT exemptions, a unified VAT rate and better administration as priorities; these are measures to collect more from existing activity, not to raise rates on the compliant few.¹
• Protect social budgets when revenue falls short. In FY25, capital and social spending bore the adjustment.¹ A floor on primary health spending would stop health from being the first line cut.
• Move toward prepaid financing. Tax-funded or insured coverage spreads cost across the population; reliance on direct payments does the opposite.
• Publish and track the numbers. The tax data in the World Bank database end in 2021; timely, consistent public series would let citizens see whether new revenue reaches clinics.

Limits of the data

Tax-to-GDP ratios differ by definition (central government, NBR-only, total revenue), and the WDI and IMF series are not interchangeable. Health expenditure figures are WHO estimates, which are revised, and the latest year is 2023. Cross-country comparisons mix reporting years, as noted.