Cash Economy Costs Bangladesh Tk 93,300cr in Lost Revenue Annually

Bangladesh is losing an estimated Tk 93,300 crore in potential government revenue every year as cash transactions keep a large part of economic activity beyond effective tax scrutiny, while the country’s cash-dependent economy incurs a staggering Tk 1,70,360 crore in annual costs.

The total cost, equivalent to 3.24 per cent of gross domestic product (GDP), includes the expenses of printing, transporting, storing and securing banknotes, as well as managing cash transactions across the economy, according to a Bangladesh Bank research report.

Titled The Cost of Cash Study in Bangladesh: A Comparative Analysis of Cash and Digital Payment, the report estimates that the annual cost of digital transactions is only Tk 5,964 crore, or 0.11 per cent of GDP - making cash transactions approximately 28 times more expensive.

Even after excluding potential government revenue losses, the annual cost of cash transactions stands at around Tk 77,000 crore. Commercial banks bear Tk 36,800 crore of this burden, followed by consumers at Tk 28,000 crore, small businesses at Tk 6,200 crore and microfinance institutions at Tk 5,600 crore.

The report identifies the informal economy as a major obstacle to revenue mobilisation, estimating that it accounts for around 27.2 per cent of Bangladesh’s GDP. Cash transactions are often difficult to document, trace and verify, limiting the authorities’ ability to monitor economic activity and collect taxes effectively.

The findings highlight the fiscal and economic stakes of reducing reliance on physical currency. Beyond the potential revenue gains, lowering cash-handling costs could free up resources currently absorbed by banks, businesses and consumers.

Bangladesh Bank has been promoting Bangla QR, a standardised quick response code-based payment system, to accelerate the shift towards cashless transactions. The central bank aims to make at least 50 per cent of transactions cashless by 2028 and has introduced an incentive scheme to encourage adoption among small and marginal traders and service providers.

However, the study identifies transaction fees, business costs, delays in payment settlement and limited digital literacy as barriers to wider adoption. Making digital payments affordable and ensuring timely settlement will be crucial to encouraging merchants and consumers to move away from cash.

The report also calls for stronger tax monitoring and proper documentation of business transactions to improve transparency and bring more economic activity within the formal system.

Bangladesh Bank’s currency data underline the scale of the challenge. At the end of June this year, the outstanding stock of banknotes issued by the central bank stood at Tk 3,70,269 crore, of which Tk 3,36,375 crore was held outside the banking system.