Bangladesh’s overall governance and macro fiscal environment are facing multi-systemic risks rooted in deep-seated structural and institutional weaknesses, despite minor progress in financial digitalisation, according to a recent assessment by the Asian Development Bank (ADB).
The publication, titled Governance and Macrofiscal Pillars (GMaP) Assessment, highlights that weak governance systems are blurring the lines between national plans and agency-level implementation, leading to persistent fiscal indiscipline, budget execution failures, and massive losses in State Owned Enterprises (SOEs).
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The report comes on the heels of a massive political transition in Bangladesh, which saw a student-led uprising in 2024, the establishment of an interim government, and the subsequent election of a new administration in February 2026.
This political reset coincides with urgent economic pressures, including low revenue yields, widening external imbalances, and a narrowing policy space ahead of Bangladesh's graduation from the Least Developed Country (LDC) status.
The ADB report criticised the government's public financial and expenditure management systems. While the country has introduced notable improvements like the Integrated Budget and Accounting System (iBAS++) and adopted the International Public Sector Accounting Standards (IPSAS) Cash Basis, the actual effects are heavily diminished by weak oversight.
Major fiscal discrepancies identified include massive gaps between total budgeted amounts and actual expenditures.
Persistent procurement delays and underspending by implementing agencies have led to a bunching of expenditures at the end of the fiscal year, driving up costs and severely lowering allocative efficiency.
Furthermore, the efficiency of the Treasury Single Account is being obstructed because numerous government accounts, including those of SOEs, remain completely outside its purview.
The iBAS++ system also fails to monitor financial arrears, subnational governments, or extra-budgetary operations.
The report reveals an alarming deterioration in Bangladesh's extensive SOE portfolio, which held total assets worth 61.4 billion dollars in fiscal year 2022.
Between 2018 and 2022, SOE performance plummeted drastically, while total liabilities and government guarantees surged.
Specifically, the Return on Equity (ROE) dropped by 88 percent, and the Return on Assets (ROA) declined by 78 percent over the same period.
The ADB blames these losses on a total absence of a clear ownership policy, a weak legal framework, major gaps in monitoring capacities, and a lack of risk evaluation systems, which together escalate the government's overall fiscal risk exposure.
Independent oversight institutions continue to operate under severe constraints. Although the Office of the Comptroller and Auditor General conducts regular audits, its efficiency is consistently hampered by limited capacity, restricted access to digital systems, and bureaucratic pushback from other agencies.
Similarly, while Bangladesh’s Anti-Corruption Commission has reported an increase in convictions, it continues to face widespread criticism questioning its independence and objectivity due to institutional enforcement weaknesses and political interference.
Furthermore, Civil Society Organizations (CSOs) face restricted civic spaces, complex registration processes, and delays in accessing detailed government data, which limits meaningful collaboration on human rights, democratic reforms, and anti-corruption initiatives.
To address these macrofiscal and governance risks, the Manila-based lender has outlined a comprehensive, holistic reform pathway focused on eight key institutional areas:
1. Revenue Administration: Reorganising the National Board of Revenue (NBR) to eliminate internal conflicts of interest (such as the consolidation of tax policy and tax administration roles), accelerating digitalisation, and curbing illicit financial flows.
2. Debt Management: Institutionalising the Medium-Term Debt Management Strategy and establishing a dedicated public debt management office with explicit legal mandates for front-, middle-, and back-office functions.
3. Planning and Budgeting: Operationalising medium-term fiscal frameworks, improving the credibility of revenue forecasts, and integrating capital and recurrent budgeting to prevent year-end spending spikes.
4. Internal Control and Audit: Institutionalising internal audit functions across agencies, shifting to risk-based audit planning, and professionalizing audit staff.
5. Public Investment Management and Procurement: Reforming procurement regulations to remove restrictive practices and expanding the e-government procurement system to improve appraisal and costing.
6. SOE Reforms: Establishing a clear ownership policy for SOEs, strengthening the government's SOE Monitoring Cell, and mandating transparent financial disclosures.
7. Oversight and Accountability: Strengthening the independence of oversight bodies, improving annual fiscal reporting, and accelerating the public release of audit findings.
8. Civil Society Engagement: Simplifying the non-governmental organization (NGO) registration process and institutionalizing structured engagement mechanisms between the government and CSOs to support public governance.
The ADB emphasized that addressing these weaknesses through institutional and legal overhauls is critical if Bangladesh is to navigate its current economic transition and sustain long-term macroeconomic stability.