Biggest-ever budget faces revenue test

The newly elected BNP government unveiled its first budget on Thursday, proposing a record Tk9.38 trillion spending plan for fiscal year 2026–27 — a bold statement of intent from a party returning to power after 19 years. However, economists say the budget will be judged not by its ambitions but by its execution.

Finance and Planning Minister Amir Khasru Mahmud Chowdhury placed the 55th national budget before Parliament in the afternoon, under the theme “Economic Democratisation and Deregulation: Bangladesh’s Journey towards a Trillion-Dollar Economy”.

The proposed outlay crosses the Tk9 lakh crore mark for the first time in the country’s history — 19 per cent higher than the revised budget for the outgoing fiscal year.

It is also the first full fiscal plan of the Tarique Rahman administration, which swept to power with a two-thirds majority in the 12 February general election.

The last time a BNP-led government presented a budget was for FY2006–07 under the late Finance Minister M. Saifur Rahman — nearly two decades ago.
Opening his budget speech, Chowdhury framed the proposal as a budget for economic inclusivity and democratic renewal.

“Without building an inclusive and accountable economic system for all people, political reforms will not be durable,” he told Parliament.

The budget’s headline priorities are stabilising an economy battered by persistent inflation, boosting domestic and foreign investment, expanding employment, and fulfilling the BNP’s electoral pledges on social protection.

The minister described it as a plan to carry forward the aspirations that emerged from last year’s July mass uprising.

To that end, allocations for social safety net programmes have been significantly expanded, with at least eight new schemes introduced, including a Family Card programme for low-income households, in line with the BNP’s election manifesto.

The Numbers at a Glance
The government has set a revenue mobilisation target of Tk6.95 trillion, with the National Board of Revenue (NBR) expected to shoulder roughly 90 per cent of that burden — a target of more than Tk6 lakh crore.

The projected deficit stands at Tk2.43 trillion, or approximately 3.55 per cent of GDP, comfortably below the internationally accepted ceiling of 5 per cent.

To finance the deficit, the government plans to borrow Tk1.72 lakh crore from the banking sector, raise Tk8,500 crore through savings certificates, and secure roughly Tk1.16 trillion from foreign loans and grants, including approximately US$3 billion in direct budget support. Notably, no borrowing from the IMF has been factored into the projections.

GDP growth has been targeted at 6.5 per cent for FY2026–27, alongside an inflation target of 7.5 per cent. Interest payments alone are projected to reach Tk1.42 trillion, up from Tk1.34 trillion last year, reflecting the heavy debt burden inherited from the previous administration. Subsidies and incentives are projected at Tk1.26 trillion.

The Annual Development Programme (ADP) has been set at Tk3 lakh crore — 50 per cent higher than in the current fiscal year — signalling the government’s push for public investment. Education will receive Tk1 lakh crore and health Tk60,000 crore.

From the coming fiscal year, the government will also begin phased implementation of the Pay Commission recommendations, with 50 per cent of the proposed basic pay increases taking immediate effect at an additional cost of Tk35,000 crore.

Relief at the Kitchen Table
Households struggling with persistent inflation may find some relief in the budget’s tax proposals. Source tax on 60 essential commodities — including rice, pulses, wheat, potatoes, fish, onions, garlic, edible oil and salt — has been proposed at a uniform rate of 0.5 per cent, down from the current range of 1 to 5 per cent. The government says the measure is intended to help keep everyday prices manageable.

The tax-free income threshold for individual taxpayers remains at Tk375,000, as previously announced, while corporate tax rates remain unchanged. The excise duty threshold on bank deposits has been raised from Tk300,000 to Tk400,000.

Business Gets a Road Map
For the investment community, the budget’s most significant offering may be a medium-term tax road map — a structured plan outlining how the tax base will be expanded over the next year and the following five years. Economists say this degree of forward visibility, previously absent, gives businesses greater certainty when planning investments.

The budget also pledges not to increase the burden on existing taxpayers, instead focusing on widening the tax net.

One notable measure proposes a fixed advance tax of Tk2 per Tk1,000 on supplies to the country’s approximately 7 million retail traders.

The government says the move will broaden the revenue base while minimising opportunities for irregularities, although the implementation mechanism remains unclear.

In another structural reform, the budget proposes making National Board of Revenue Tax Identification Number (TIN) certificates mandatory for opening bank accounts nationwide.

Exemptions will apply to students, pensioners and holders of basic Tk10 accounts. With more than 170 million bank accounts currently in operation, economists support the objective but warn that the requirement could create difficulties for citizens in rural and semi-urban areas unfamiliar with the TIN registration process.

Domestic Industry and the Creative Economy
The budget extends substantial support to domestic manufacturing. Import duties on 51 categories of raw materials used in active pharmaceutical ingredient (API) production have been fully withdrawn, while nine additional items have been added to the existing pharmaceutical concession list.

Duties on raw materials used in electronics manufacturing, including refrigerators, have been reduced, while tariffs on imported finished electronic goods have been increased to protect local producers.

Import duties on electric vehicles have been cut sharply, from a combined 93 per cent to 64 per cent for vehicles priced at up to US$25,000, and to 80 per cent for those priced between US$25,000 and US$50,000. Duty concessions for manufacturers of electric buses and trucks have been extended until June 2031.

In what may be the budget’s most novel initiative, Chowdhury formally announced a Creative Economy framework backed by an initial Tk500 crore fund — comprising Tk200 crore from the government and Tk300 crore from Bangladesh Bank’s CSR pool.

The initiative will cover film, music, drama, software, design, video games and publishing.

To support the sector, the 15 per cent VAT on social media content creators has been proposed for removal, import duties on high-end film equipment have been reduced from 15 per cent to 5 per cent, and the existing 5 per cent regulatory duty on musical instruments such as guitars, pianos and violins has been proposed for withdrawal. Tax exemptions for start-ups and technology ventures will continue.

The Implementation Challenge
Despite the breadth of its ambitions, the budget faces a formidable credibility test on revenue mobilisation.

The NBR missed its target in the current fiscal year by a wide margin, collecting Tk3.70 lakh crore against a revised target of Tk5.03 lakh crore during the first 10 months.

Next year’s target of more than Tk6 lakh crore would require collections to rise by approximately Tk2 lakh crore above the NBR’s likely actual outturn this year — an increase without precedent.

“The budget largely relies on conventional revenue collection methods,” said Khondaker Golam Moazzem, Research Director at the Centre for Policy Dialogue (CPD). “The proposal to expand the tax net is promising, but raising government employees’ salaries at a time of financing risk adds further pressure.”

GDP growth has declined for three consecutive years, slipping below 4 per cent last year — the weakest performance since the Covid-19 pandemic year.

Inflation stood at 9.42 per cent in May and has remained above 9 per cent since 2023, making both the 6.5 per cent growth target and the 7.5 per cent inflation target ambitious.

Dr Mustafizur Rahman, Distinguished Fellow at CPD, cautioned that the rising debt burden demands urgent attention.

“There is no alternative to increasing domestic resource mobilisation,” he said. “Greater emphasis must be placed on project selection, expenditure control, timely implementation and skilful negotiation of loan conditions.

Otherwise, debt repayment pressures may intensify sharply in the years ahead.”

A Political Budget, Plainly
Economists broadly view the budget as a reflection of the BNP’s political commitments — from its 31-point reform charter to its election manifesto — as much as a technocratic fiscal document.

The Finance Minister made no attempt to obscure that framing, saying the budget is designed to embody the aspirations of a post-uprising Bangladesh.

For a party returning to the treasury benches after nearly two decades, the budget is a declaration of direction. Whether it can be delivered is another matter — and the more difficult one.

“A political government has presented this budget with its political thinking intact,” said Moazzem. “Now, actually stabilising the economy, including the banking sector, and making this budget work is the real challenge.”