Target per capita income set at USD 4,591, with 8.5pc growth over five years; reforms prioritised

The government aims to raise the country’s average per capita income to USD 4,500 over the next five years. The target for per capita income has been set at USD 4,591 for the 2030–31 fiscal year.

The target is outlined in a report titled Transforming Economy from Fragility to Prosperity, prepared by the General Economics Division (GED) of the Ministry of Planning. The country’s average per capita income stood at USD 2,958 in the fiscal year that ended recently.

The GED report lays out the government’s plans for reforms and development in various sectors over the next five years. The report was released on Wednesday. The plan covers the 2026–27 to 2030–31 fiscal years.

Per capita income does not refer to an individual’s income. A country’s total national income includes income generated domestically as well as remittances and other sources. This national income is divided by the population to calculate average per capita income.

High inflation has been one of the biggest challenges facing the economy for several years. The current government wants to bring inflation under control. Under the plan, the target is to reduce inflation to 5 per cent by the 2030–31 fiscal year. Inflation stood at 8.32 per cent in July this year.
Meanwhile, the government wants to take GDP growth to a record level over the next five years. GDP growth has been set at 6.5 per cent for the current fiscal year. According to the GED report, growth will increase every year over the next five years, reaching 8.5 per cent in 2030–31.

According to the GED plan, the next five years have been divided into three phases for transforming the economy. In the first year, macroeconomic stability will be restored by stabilising the exchange rate, controlling inflation and improving conditions in the banking sector. The first year has been designated the year of recovery and stability.

The first through third years will be known as the years of restoration. During this period, emphasis will be placed on increasing revenue collection, ensuring effective government spending and bringing stability to debt management, which is under pressure. The third through fifth years will be the years of restructuring and accelerating growth. During this period, the economy will be prepared for “take-off” by increasing domestic and foreign investment and creating employment.

The GED’s Transforming Economy from Fragility to Prosperity report outlines reform plans in various sectors—including banking, revenue, health, education, communications, employment and development activities—as part of this economic transformation.

M Masrur Reaz, chairman of Policy Exchange Bangladesh, told Prothom Alo that the plan represents the government’s vision for the future. It reflects an aspiration for development and provides some broad directions.

However, he said, actionable and time-bound plans are needed in areas such as employment, taxation, banking and long-term investment.

Masrur Reaz added that the economy is facing various crises and problems, including an export sector heavily dependent on ready-made garments, sluggish investment and an uncertain international trade environment. The economy lacks sufficient growth drivers, he said. Effective and implementable strategies are needed to overcome the various economic challenges, but the GED plan does not provide them.

The government has prepared a five-year reform plan for the banking sector aimed at recovering non-performing loans, strengthening supervision, establishing good governance and restoring depositors’ confidence.

The country’s banking sector faces problems including a record volume of non-performing loans, weak governance, political interference and lending to politically influential businesspeople. These problems have damaged the capital and profitability of many banks. State-owned banks are at the greatest risk.

The government will implement the reforms in three phases. The first year will focus on controlling immediate risks, the following two years on restructuring banks, and the third to fifth years on deeper reforms.

In the first year, priority will be given to high-risk banks, non-performing loans and protecting depositors.

According to the report, Bangladesh Bank will identify wilful loan defaulters and take legal action against them.

Over the following two years, governance, risk management and loan recovery systems at banks will be strengthened, along with financial safety mechanisms. In the final phase of reforms, emphasis will be placed on making banks more efficient and competitive while reducing risks across the financial system.

Steps will be taken to improve governance and transparency in banks, upgrade information systems and strengthen Bangladesh Bank’s supervisory capacity. Legal and institutional changes will be introduced to enhance the operational independence of Bangladesh Bank. At the same time, a regulatory framework aligned with international standards will be developed.

According to the GED plan, the revenue policy and revenue collection functions will be separated as part of reforms in the revenue sector. The interim government has already taken steps in this direction.

Other proposed revenue reforms include introducing a single VAT rate; reducing tax exemptions; bringing the informal sector under the tax net by imposing a minimum tax on small businesses; and simplifying tax payments through digitalisation.

The target is to raise the tax-to-GDP ratio to 10 per cent by the 2030–31 fiscal year. Bangladesh currently has one of the lowest tax-to-GDP ratios in the world.

The government has identified the communications and transport sector as one of its priorities. It plans to undertake several major projects over the next five years.

These include the Narayanganj–Cumilla–Laksam–Feni chord line railway. The government also plans to electrify the Dhaka–Chattogram double-line railway. In addition, there are plans to establish double lines on the Dhaka–Panchagarh and Dhaka–Chapainawabganj routes.

The plan also calls for prioritising an initiative to establish a rail link from Dhaka to Kunming in China via Myanmar.

There are also plans to introduce metro rail, elevated rail, commuter rail lines and monorails in Dhaka and other major cities.

Unemployment is highest among highly educated young people in Bangladesh. The government has planned various initiatives for young people. For example, 560 young entrepreneurs will receive funding from a startup fund every year through 2030. In addition, 1,200 women entrepreneurs will receive various forms of support each year.

The GED report places strong emphasis on establishing good governance. It says good governance is an essential prerequisite for macroeconomic stability, sustainable and inclusive economic growth, and development outcomes. This includes effective management of public resources, adherence to the rule of law, transparency, accountability and building strong institutions.

The report further states that when governance frameworks function effectively, they create a stable economic environment in which effective fiscal and monetary policies, low inflation and investor confidence can be sustained.