Effect of Fiscal Policy Variables on Accelerating Economic Growth in Bangladesh

The effect of fiscal policies in reducing inequality in a society is significant, but only if those policies are framed and applied consciously. In a recent study, we have assessed the effect of fiscal policy variables in Bangladesh on enhancing the country’s economy. Based on our assessment, we provided prescriptions on the right mix of such variables.

Researchers: Dr Sultan Hafeez Rahman; Zeeshan Ashraf

Timeline: May – December 2019

Status: Completed

Contact: Dr Sultan Hafeez Rahman;


Bangladesh attained lower-middle-income status in 2015. Now, it aims to graduate to upper-middle-income status by 2030. To achieve that goal, the country needs to accomplish robust economic growth on a persistent basis. At the same time, it needs to maintain stability on various macroeconomic variables, such as inflation and public debt. To accelerate economic growth, the Keynesian macroeconomic policy recommends countries to employ expansionary fiscal policies in the form of higher government expenditures and tax cuts. Expansionary policies lead to greater demand in the economy by enhancing the purchasing power of individuals. But whether or not Bangladesh has the appropriate mix of fiscal policy variables, namely revenue and expenditure, to sustain high economic growth and ensure macroeconomic stability at the same time remains the question.


Our objective was to examine the effect of fiscal policy variables and provide policy prescriptions on their appropriate mix for accelerating economic growth in Bangladesh.

This study is relevant to SDG 8 (Decent Work and Economic Growth), particularly to promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all.


For empirical estimations of the association between fiscal policy variables and growth, in this study, we examined government revenue and expenditure in Bangladesh. We also analysed the changes in the shares of various components of revenue and expenditure and the implications of these changes for economic growth. Furthermore, we conducted a cross-country analysis of Bangladesh and other high-performing middle-income countries like India and Indonesia on the state of key macroeconomic variables, namely per-capita gross domestic product (GDP) and revenue. Throughout the study, relevant literature was also reviewed.

Findings and Recommendations