Himal Press 
KATHMANDU: The World Bank has said that South Asia’s growth prospects have weakened amid increasing uncertainty in the global economy.
Issuing a statement on Wednesday, the multi-lateral donor said stepping up domestic revenue mobilization could help the region strengthen fragile fiscal positions and increase resilience against future shocks.
The latest South Asia Development Update of the World Bank, titled Taxing Times, projects regional growth to slow to 5.8% in 2025, 0.4 percentage points below October projections, before ticking up to 6.1% in 2026. This outlook is subject to heightened risks, including from a highly uncertain global landscape, combined with domestic vulnerabilities, including constrained fiscal space, the World Bank said in the statement.
“Multiple shocks over the past decade have left South Asian countries with limited buffers to withstand an increasingly challenging global environment,” Martin Raiser, World Bank Vice President for South Asia, said in the statement. “The region needs targeted reforms to address vulnerabilities such as fragile fiscal positions, backward agricultural sectors, and the impact of climate-related shocks.”
Government revenues in South Asia have totaled 18% of GDP during 2019–23, below the 24% of GDP average for other developing economies. Revenue shortfalls are particularly pronounced for consumption taxes but are also sizable for corporate and personal income taxes, it added.
Franziska Ohnsorge, World Bank Chief Economist for South Asia, said low revenues could threaten macroeconomic stability in South Asia, especially in times of elevated uncertainty. “South Asian tax rates are relatively high, but collection is weak, leaving those who pay taxes with high burdens and governments with insufficient funds to improve basic services,” she added.
The report has recommended a range of policies to improve tax revenues by eliminating loopholes, streamlining tax codes, tightening enforcement and facilitating tax compliance.
