Budget bets big, consumers face tax pain

The government’s proposed Tk 9.30 lakh crore budget for FY2026-27 puts improving living standards at the centre of its agenda, but several tax measures aimed at boosting revenue may add fresh pressure on consumers already struggling with high inflation.

Finance and Planning Minister Amir Khosru Mahmud Chowdhury on Wednesday night presented the proposed budget to Prime Minister Tarique Rahman, setting out a spending plan that includes Tk 3 trillion for the Annual Development Programme.

The budget comes at a time when the economy is facing persistent inflation, revenue shortfalls and pressure to meet targets under the International Monetary Fund loan programme.

According to Finance Ministry sources, the government has set a total revenue target of Tk 6.95 lakh crore for the next fiscal year. Of the amount, around Tk 5.50 lakh crore is expected to come from the National Board of Revenue.

To raise collections, the NBR plans to increase source tax on the local supply of 28 essential food and agricultural products, including rice and lentils, from 0.5 percent to 1 percent.

The move is aimed at enhancing revenue collection and reducing tax evasion.

The tax authority also plans to expand the VAT net to grassroots businesses at district, upazila and village levels as part of efforts to improve Bangladesh’s low tax-to-GDP ratio.

In another proposal, advance income tax may be introduced on motorcycles.

Taxes on high-capacity vehicles are also likely to be increased, while battery-run autorickshaws, popularly known as “Bangla Tesla,” may be brought under the AIT framework.

Economists fear these measures could raise business costs and ultimately affect consumers.

The largest ADP allocations are expected to go to the Local Government Department and the Road Transport and Highways Department, followed by the power, primary and mass education, and secondary and higher education sectors.

The new ADP is likely to be Tk 70 billion higher than the original ADP of the current fiscal year and Tk 100 billion higher than the revised allocation.

To finance the development programme, the government plans to mobilise Tk 1.90 lakh crore from domestic sources and Tk 1.10 lakh crore from foreign assistance.

The rest of the budget will be spent on operational costs, including social safety net programmes, subsidies and interest payments on domestic and foreign loans.

The finance minister also informed the prime minister that the government is prioritising digital transformation, expansion of the tax net, strengthening administrative capacity, and boosting non-tax and non-NBR revenue collection.

However, the NBR has historically struggled to meet its revenue targets. In the first nine months of the current fiscal year, the tax authority faced a record Tk 98,000 crore shortfall despite more than 11 percent growth in tax collection.

Dr Zahid Hussain, former lead economist at the World Bank’s Dhaka office, told The New Nation that the economy is facing multiple pressures and the government should restrain spending, especially under the ADP.

In FY2025-26, the initial revenue target was set at Tk 5.64 lakh crore and later revised upward to Tk 5.88 lakh crore.

However, uncertainty remains over whether total revenue collection will cross Tk 4 lakh crore by the end of the fiscal year.

Officials said the ambitious revenue target is partly linked to conditions under the IMF loan programme, which requires Bangladesh to raise revenue collection to 9.2 percent of GDP.

Under the proposed framework, the budget deficit for FY2026-27 could reach Tk 2.35 lakh crore, which is Tk 9,000 crore higher than the current fiscal year’s target and Tk 35,000 crore above the revised deficit.

The government has set a GDP growth target of 6.5 percent for the next fiscal year and aims to bring inflation down to 7.5 percent.

It also plans to raise investment to 31.4 percent of GDP and increase revenue collection to 10.17 percent of GDP.
But inflation control remains a major challenge.

Bangladesh Bureau of Statistics data show that inflation rose to 9.04 percent in April from 8.71 percent in March, even though the revised budget had targeted inflation at 7 percent.

Finance Ministry sources said Bangladesh’s GDP size for the next fiscal year may be projected at Tk 68 trillion, up from the revised estimate of Tk 61.21 trillion for the current fiscal year.