Prominent economists on Wednesday expressed their disappointment over the proposed budget for FY26 and described it as “a missed and lost opportunity” for reforms despite its potential.
Although white paper, task force, and reform commission reports have been acknowledged, neither budgetary allocations nor fiscal measures were systematically designed to reflect the recommendations extended through these reports, they further said.
They made the remarks at a dialogue titled “National Budget 2025–26: What Is There for the Left-Behinds?” organized by the Citizen's Platform for SDGs on Wednesday.
Dr Debapriya Bhattacharya, convenor of the Citizen’s Platform and distinguished fellow at the Centre for Policy Dialogue (CPD), said: “Despite this being an unusual government in terms of its political context, the budget follows a very conventional pattern. There were high expectations from this budget, but we do not see any meaningful steps toward realizing them. The proposed national budget has turned into a budget of disappointment.”
He also noted that the aspirations voiced on 5 August and the pressing needs arising from the evolving socio-economic landscape have not been addressed in the budget: “The concerns and demands of the marginalized communities are notably absent.”
Mustafizur Rahman, CPD's distinguished fellow, said: “It is being said that the proposed budget is a budget of missed opportunities. However, I would say that this year's budget is a lost opportunity because they presented a traditional budget that made us weak.”
The proposed budget shrank the scope of social protection. This contraction not only undermines the current year's fiscal priorities but could also jeopardize next year's budgeting framework, he warned.
Regarding the social safety net allocation, he said: “The old-age allowance has been increased from Tk600 to just Tk650, while inflation has pushed the actual cost of living up to Tk900. In real terms, the social safety net has weakened. This will diminish the legitimacy of future governments to reclaim or expand such allowances.”
Prof Selim Raihan, executive director of the South Asian Network on Economic Modeling (Sanem), said that the budget can be called a missed opportunity because the budget has tried to provide something new from within the old structure, which is insufficient.
“There has been some restructuring in the Social Safety Net Program (SSNP), but no major restructuring has been seen. In addition, the allocation to the education and health sectors is also not as expected. There was an opportunity to do something different with the budget this time,” he added.
Chartered accountant Zia Hasan remarked that many large corporations have seen declining sales due to inflation, a reality not acknowledged in the budget proposal.
The keynote presentation at the dialogue was delivered by Towfiqul Islam Khan, senior research fellow at CPD.
Reform aspirations
Khan said: “It is not unexpected to assess the budget through the lens of the reform efforts of the interim government, including the White Paper, Task Force, and Reform Commission reports. Though these reports have been acknowledged, neither the budgetary allocations nor the fiscal measures were systematically designed to reflect the recommendations extended through these reports.”
His presentation stated that key areas in public finance management remain unaddressed, with a notable absence of direct tax reform measures, and instead the focus is on indirect taxation.
Other points include:
- No detailing of reforming NBR, which should not only include the bifurcation but also digitization, field operations, or data analytics, despite reference to increased manpower.
- No mention of building trade negotiation capacity; critical for post-LDC graduation competitiveness.
- No mention of data systems reforms, especially in terms of interoperability, modern data collection tools, staff training, and frequent surveys.
- Changes in fiscal measures in view of LDC graduation, adjustments to Trump’s tariffs, and other measures mentioned in the budget speech reportedly formulated without taking into account the proposed reform pathway to be proposed by the NBR Advisory Committee.
Tax burden for middle-income groups
Although the current interim government, which came to power through the movement, promises to reduce the gap between the rich and the poor through reforms, the proposed budget does not include any significant reforms, especially for the middle class.
The tax-free income limit has been revised upward, incentivizing individuals earning up to Tk40,400 per month. However, this adjustment brings no relief to existing taxpayers.
The report also stated that middle-income earners (Tk74,100–98,080/month) face the sharpest tax burden increase. High-income earners (Tk250,000–600,000/month) experience a gradual decline in tax increase, while a Tk600,000/month earner’s tax increased by just 2.5%.
The highest effective tax burden is concentrated among middle-income earners, highlighting a disproportionate impact on those with limited capacity to pay.
Middle-income buyers in Dhaka face the steepest burden, from 6.20% to 34.31% more than the highest marginal tax rate. Buyers in smaller metropolitan cities (e.g., Khulna Nirala R/A) are also hit hard, from 1.93% to 14.53%, even in lower-value markets.
In contrast, high-end zones like Gulshan-2 remain relatively protected, as their ETR rises only from 1.99% to 7.15%, keeping the effective burden low despite higher flat values. The new provision continues to enable the legitimization of black or undeclared money, as reduced real estate tax rates offer a deeply discounted path to asset declaration.
For example, a Tk12 crore flat in Gulshan-2 incurs only about Tk86 lakh in tax under the current ETR, compared to Tk3 crore at a 25% rate, leaving a tax incentive of over Tk2.14 crore.
Unrealistic macroeconomic framework
The keynote presentation also showed that the budget ignored the provisional estimates of BBS and relied on their overestimated targets for the ongoing FY25 to establish the benchmarks for the budget.
It stated that with an aspiration to bring down inflation from 9% to 6.5% within a year, the conservative monetary policy is likely to continue with the high levels of policy rates and interest rates, making private investment costly.
Indeed, to achieve the 5% target, the GDP would need to grow by 6.7% during the H2 of FY25—too ambitious—while reaching the 4% target would require the economy to grow by 4.7% during the second half.
Inflated fiscal framework
As previously noted, the revised budget failed to consider the ongoing fiscal year's budget implementation status. Both revenue mobilization and expenditure growth targets will be ballooning when the final implementation status is made available.
It is more likely that the government will anchor on the level of budget deficit and adjust expenditure accordingly, and revenue mobilization will determine the fiscal framework at the margin, taking a leaf from the old playbook!
In the budget, new funds are also introduced: Women Entrepreneurship and Empowerment (with Tk125 crore) and Startup Fund (with Tk100 crore). Also, Tk100 crore has been allocated to organize Tarunyer Utshob (Youth Festival) to engage youth in national development. Much of these allocations will not be used.