Achieving 21% tax-GDP ratio by 2041 'nearly impossible': Ahsan H Mansur

The government's ambitious target of achieving a 21.6% tax-GDP ratio by 2041 to get the GDP growth of about 10% is nearly impossible, said economist Ahsan H Mansur.

"If we want almost 10% GDP growth, then we have to raise our investment level to more than 30% of GDP. Under current policies, it is tough to achieve this goal. To get this growth, we have to achieve a 21.6% tax-GDP ratio, which is below 9% now. From this point to 21.6% is something impossible," he said when asked about the possibility of realising the target within 2041.

The former economist of the International Monetary Fund (IMF) made the comment at an international economists' conference titled "Sustainable Future: Ensuring Economic Stability and Inclusive Social Development" organised by the Bureau of Economic Research (BER) and the Department of Economics of Dhaka University. Prof Atonu Rabbani, professor of economics at Dhaka University, was the chair of the first session of the conference.

"Even if you start from today, and do everything from now on, as we have already lost some time, we will be able to achieve at best 18% of GDP by 2041 and that would take Bangladesh to the level where India is today," Ahsan H Mansur, also executive director of Policy Research Institute (PRI), said.

Highlighting the government's aim to secure Tk1.56 lakh crore loan from the banking sector, the economist raised concerns about the impact on savings within the banking system. 

He said, "With a projected 10% increase in savings, up from last year's 7.6%, deposits are estimated to rise to Tk1.5 to Tk1.6 lakh crore. So, if the government is taking everything, what will be left in the private sector?

"Our financial sector has shrunk. Our exposure, imports and reserves have also shrunk in relation to GDP. So we have a serious problem."

Fahmida Khatun, executive director at the Centre for Policy Dialogue (CPD), said, "Most of our funds are invested in physical infrastructure like transportation, communication, and energy. This sector consistently receives the highest investment year after year. While it's important as it creates numerous jobs, we often neglect our social development. This is because we don't invest enough in education and health.

"Even the small amount we do allocate to education is often not properly utilised. As a result, we lack skilled labour. Investing in education isn't just expenditure; it's an investment that yields significant returns in the long term for the economy."

She said, "We could also address the skill gap by importing skilled workers from other countries. For instance, Indian IT skilled labour dominates in the USA, yet we struggle to find skilled workers despite having a large population. Our average unemployment rate is 3.2%, but youth unemployment exceeds 10%." 

Fahmida further said, "Moreover, numerous tax exemptions are granted to certain sectors year after year, draining our national resources. There are at least 30 sectors currently receiving exemptions.

"Furthermore, subsidies are provided to the power sector under the guise of capacity charges, despite yielding no tangible benefits.

"We should withdraw these subsidies and redirect the funds towards education, healthcare, and social safety nets. I believe the government prioritises investment in physical infrastructure because it yields visible results that can be immediately seen. However, in a country like ours, rampant corruption remains a significant issue."