The BNP-led government is set to present its first full national budget after returning to power following a 19-year gap. Finance Minister Amir Khasru Mahmud Chowdhury's proposed budget for FY2026-27 stands at Tk938,000 crore, making it one of the largest in the country's history.
The budget combines ambitious development goals with significant challenges related to revenue collection, fiscal deficits, debt dependence and implementation capacity.
At its core, the budget seeks to expand the tax base without raising tax rates, formalize economic activity, strengthen social protection programmes and deliver on election pledges. At the same time, it remains heavily reliant on borrowing, raising questions about its long-term sustainability.
A large budget with ambitious targets
The government has framed the budget around its goal of transforming Bangladesh into a $1 trillion economy by 2034. GDP growth for the next fiscal year has been projected at 6.5%.
However, economic growth has remained close to 4% over the past three years, while international financial institutions have offered more conservative forecasts.
Economists have questioned the feasibility of achieving the growth target amid subdued private investment, high borrowing costs, fiscal pressures and continued economic uncertainty.
Broad tax relief measures
One of the key features of the budget is an extensive package of tax and VAT exemptions aimed at reducing living costs and supporting economic activity.
Tax concessions have been proposed for food products, agricultural inputs, medicines, medical equipment and technology products. Source tax rates on several essential commodities, including rice, wheat, potatoes, fish, meat, onions, garlic, ginger, edible oil and sugar, are set to be reduced.
The government has also proposed VAT exemptions on fertilizers and tax benefits on pesticides to lower agricultural production costs.
In the healthcare sector, duty and VAT exemptions have been announced for cardiac stents, intraocular lenses, kidney dialysis equipment and raw materials used in cancer drug production.
The budget also proposes withdrawing the existing Tk300 specific tax on mobile SIM cards and reducing taxes on a range of technology products, including locally assembled mobile phones, computer monitors, memory cards, printers and refrigerators.
To support the creative economy, tax incentives have been extended to the film, music and cultural sectors. Startups have been given formal legal recognition for the first time, while freelancers and content creators will receive VAT-related benefits.
Expanding the tax net
While tax rates remain largely unchanged, the government plans to widen the tax base significantly.
Taxpayer Identification Numbers (TIN), Proof of Submission of Return (PSR) and Business Identification Numbers (BIN) will become mandatory for a growing number of activities, including opening bank accounts, obtaining business loans and renewing trade licences.
The National Board of Revenue's database will be linked with national identity cards, banks, land offices and utility providers to improve compliance and identify tax evasion.
Retail businesses are also expected to face greater scrutiny as authorities seek to expand tax collection throughout the supply chain.
As a result, individuals and businesses operating outside the formal tax system are likely to face increased compliance requirements.
Scope for legalizing undisclosed assets
One of the budget's most debated provisions is the opportunity to declare previously undisclosed income linked to property transactions.
Taxpayers will be allowed to voluntarily declare differences between actual transaction values and deed values in the purchase or sale of land, apartments and buildings by paying applicable taxes.
While the government describes the measure as part of broader tax administration reforms, critics argue that it effectively provides another avenue for the legalization of undisclosed wealth.
Higher taxes on luxury spending
Although there had been discussions about introducing a wealth tax, the government has retained the existing surcharge structure.
Instead, taxes have been increased on luxury goods and services, including high-end vehicles, helicopters and firearms.
Advance income tax rates on high-capacity vehicles have been raised significantly, while helicopter registration and fitness renewals will be subject to a proposed source tax of Tk10 lakh.
In contrast, duties on electric and plug-in hybrid vehicles have been reduced to encourage environmentally friendly transportation.
Mixed impact on the middle class
The tax-free income threshold has been increased from Tk350,000 to Tk375,000, providing limited relief to some taxpayers.
However, tax benefits on savings instruments, including savings certificates, deposit pension schemes (DPS) and life insurance products, have been reduced.
In particular, earnings from savings certificates will no longer be treated as final tax liability, potentially increasing the tax burden for many middle-income savers.
Economists view this as one of the more challenging aspects of the budget for middle-class households.
A deficit-financed budget
The proposed budget projects revenue of Tk695,000 crore against expenditure of Tk938,000 crore, resulting in a deficit of Tk243,000 crore.
To finance the gap, the government plans to borrow Tk112,000 crore from domestic banks and Tk116,000 crore from foreign sources.
Economists warn that increased government borrowing from the banking sector could further limit credit availability for private businesses.
Private-sector credit growth has already fallen below 5%, reflecting sluggish investment activity.
Inflation challenge remains
The government aims to reduce inflation to 7.5% in the next fiscal year.
Measures such as tax relief on essential goods, incentives for agriculture and lower healthcare costs could provide some support.
However, economists argue that tax reductions alone are unlikely to bring inflation under control. Effective market management, stronger supply chains and coordinated monetary and fiscal policies will also be required.
A budget built on ambition
The FY2026-27 budget can be characterized as a combination of tax relief, tax-base expansion, welfare spending and debt-financed development ambitions.
It seeks to reduce living costs, encourage investment, support startups and expand social protection programs. At the same time, it relies on ambitious revenue targets, substantial borrowing and a broader effort to formalize economic activity.
The scale of the budget's promises is significant. The central question now is whether the government can effectively implement its plans or whether the budget's ambitions will prove difficult to translate into results.