Bangladesh has made considerable progress in growth, development, and poverty reduction over the last decades. Since 2010, per capita real Gross Domestic Product (GDP) growth, averaging 5 percent annually, has resulted in a steady decline in poverty. Bangladesh reached lower-middle income status in 2015. The country aspires to graduate from the United Nations (UN) Least Developed Countries list in 2026 and attain upper middle-income status by 2031.

Bangladesh has also managed to improve its Public Financial Management (PFM) systems as a key ingredient of overall governance. The PEFA 2016 assessment highlighted progress in areas such as medium-term budgeting, debt management, fiscal transparency, improved financial information, external auditing, and training of officials on PFM. Yet challenges remain. The assessment identified persisting deficiencies in the PFM system, including in revenue administration, internal controls, external oversight mechanisms, and follow-up to audit observations.

Whilst the economy has been growing, revenue collection as a percentage of GDP has not increased, mainly because of shortcomings in tax policy and administration. Tax revenue remains relatively low compared to other countries in South Asia. The Tax Administration Diagnostic Assessment Tool (TADAT) assessment conducted in March 2017 identified tax registration, risk management processes, audit management, and internal audit as key areas in need of improvement.

PEFA 2016 pointed to weaknesses in the legislative scrutiny of the budget, and internal and external audit. The low audit coverage and predominant focus on compliance audits, along with the timeliness of audit reports, legislature’s scrutiny, and the effectiveness of follow-up on audit recommendations were seen as concerns. Additionally, the Office of the Comptroller and Auditor General (OCAG) Strategic Plan 2013-2018 and the PFM reform strategy (2016-2021) recognised the limitations of audit coverage and processes, timeliness in preparing and approving audit reports, and insufficiency of professionalism among auditors to provide adequate assurance that public funds are used efficiently and effectively.

Since 2009, the EU has contributed EUR 15,000,000 to PFM reform actions in the country implemented through a PFM Multi Donor Trust Fund (MDTF) managed by the World Bank (WB). This proved effective in bringing a degree of PFM improvement but not enough to fuel systemic reform and feed a relevant and continued policy dialogue.

In August 2016, the Government adopted a comprehensive Public Financial Management Reform Strategy 2016-2021 (PFMRS). It was based upon the PEFA 2016 findings and was developed with the support of the MDTF to which the EU was contributing. The Government has also formulated and adopted a PFM action plan that laid out the implementation of the PFMRS. In addition, the Strategic Plan (2013-2018) within the OCAG and the Tax Modernisation Plan of the National Board of Revenue (NBR) (2011-2016) provided a good basis for the identification of the priority areas of interventions.

The existence of a comprehensive PFMRS and the EU opportunity to promote a systemic approach and comprehensive reform through policy dialogue have led the EU Delegation to consider additional and targeted support in the country’s PFM area in the areas of domestic revenue mobilisation and domestic accountability.

The Intervention “Technical Assistance to support the implementation of the PFM Reform Strategic Plan in Bangladesh” is financed under the Instrument for Development Cooperation (DCI) and corresponds to the priority of Democratic Governance. It is implemented through the procurement of a Service Contract, which was awarded to a Consortium led by DT Global, the Implementing Partner (IP). The other members of the consortium are IPE Global, ADSL, and C2D.