The new government in Bangladesh has had little time to settle in after the February 2026 national election. Instead, it has been thrust immediately into a global crisis. With the ongoing war between the US, Israel, and Iran, the fallout has hit home in the form of a massive energy crisis.
For a country like ours, which leans heavily on the Persian Gulf for fuel, this is a major economic headache. The ruling party won its mandate with big promises of employment, reform, taming inflation, and a crackdown on corruption, but those goals are now facing a trial by fire from external shocks.
As we count down to the fiscal year 2026-27 national budget this June, the finance ministry is already dropping hints about tax hikes.
The fiscal burden is underscored by additional expenditure of tens of thousands of crores already incurred to procure energy from a volatile spot market, directly influenced by the ongoing US-Iran confrontation.
According to the local think tank SANEM, we’re looking at a potential 1.2% decline in real GDP and a 4% spike in consumer prices if global crude oil and LNG prices increase further.
The view from the outside isn’t much rosier. The Asian Development Bank’s April 2026 outlook predicts our inflation will hit 9% -- uncomfortably higher than India’s 4.5% or Pakistan’s 6.4% or Sri Lanka’s 5.2%.
In fact, Bangladesh is projected to top the regional inflation charts for both 2026 and 2027.
To sustain the government expenditure in this critical period, simply hiking taxes is a risky move. It will drain the wallets of already struggling consumers and breed deep frustration among taxpayers.
The government needs to exercise strategic foresight. For an economy like ours, where the tax-to-GDP ratio lags behind our regional peers, moving toward a “cash-lite” system (not cashless) isn’t just a tech trend but a survival strategy.
The logic is simple: Digital payments leave a trail. They make it harder for corruption to hide, underreporting income and easier for the tax net to expand. In a world run on cash, transactions happen "off the books," causing substantial revenue leakage.
By going digital, the government can better monitor the economic activities and boost its exchequer without having to squeeze existing taxpayers with higher rates.
Then there’s the "shadow economy." While it’s hard to pin down the exact size of this informal market, estimates suggest it could be anywhere from 10% to 38% of our GDP.
Every "off-the-books" transaction means lost VAT, corporate tax, and salary tax. It also creates unfair competition where compliant, tax-paying businesses struggle to compete with those flying under the radar.
The Centre for Policy Dialogue (CPD) estimated that in 2021 tax losses from this shadow economy reached a staggering Tk84,200 crore. To put that in perspective, that’s about 300% of what we spend on social safety nets and welfare.
Moreover, if the growth of the shadow economy is not interfered, it actually distorts the economic indicators and macroeconomic data. The shift towards a cash-lite economy provides fiscal authorities with the reliable data required to implement fairer tax policies and fiscal decisions.
The savings from reduced costs in printing, securing, and transporting physical currency can be reinvested into vital infrastructure and social welfare programs. For a nation seeking to improve its fiscal performance, digital payments serve as a catalyst for formalizing the economy, accuracy of the economic data, curbing tax evasion, and broadening the tax base without needing to raise tax rates.
The good news? We already have the tools. Our MFS network is already moving billions of taka every single day. A push for cashless payments would naturally boost smartphone and internet use, areas where we still trail India and Sri Lanka.
The Indian experience serves as an instructive model, where the widespread adoption of QR codes by even street-level vendors has institutionalized digital payments. In contrast, a large scale of our local restaurants, pharmacies, and groceries still insist on cash, effectively blocking the path to a modern economy.
People usually hide in the informal economy because they fear high taxes or harassment from tax officials. The government needs to swap "tax policing" for a more "tax-friendly" culture.
By setting up a simpler regime for small businesses -- similar to the success stories in Thailand or Vietnam -- we can bring them into the fold without scaring them away.
A few years ago, the government offered a welcome incentive: A 2.5% corporate tax reduction if companies kept their annual cash expenditure below Tk36 lakh. This was a clear step toward a cash-lite future. But the measure was mysteriously withdrawn in last year’s fiscal budget. Does this not resemble taking a step forward only to retreat by two?
While business resistance to a cash-lite ecosystem is to be expected, the government must balance its role as a supportive partner with that of a rational and effective regulator.
We should follow the lead of more developed economies. For instance, why not at least make digital payments mandatory for businesses in city corporation areas?
Offering incentives -- like a two-year tax holiday for those who make the switch -- could be the sweetener that gets many on board. If India can get its local fish bazars to go digital, why can't Bangladesh?
Going cashless is not our goal, but going "cash-lite" is. Cash will always have its place, but with the right blend of policies and unwavering regulatory will, we can cross the finish line to a transparent, accountable economy far sooner than most believe.
Asif Reza Akash is a certified management accountant and a member of the Institute of Management Accountants, USA.
