The interim government’s Tk7.90 lakh crore budget for the Financial Year 25-26 carefully balances IMF imposed fiscal discipline with modest inflation relief measures.
The budget, presented by Finance Adviser Salehuddin Ahmed in a pre-recorded video highlights increased social safety allowances, subsidy reductions, widened tax nets, revenue collection reforms and narrows the scope for whitening black money,
The conditions prescribed by global lenders such as the International Monetary Fund (IMF) can be seen in the measures such as the tax net widening further to ensure higher revenue collection with significant reform in tax policies like subsidy reduction.
Individual taxpayers will see their tax-free income limit go up to Tk3.75 lakh from FY27, up from Tk3.5 lakh. However, the rates in the corresponding slabs will be higher.
For the assessment year 2025-26, the tax-exempted threshold has been kept at Tk3.50 lakh of annual income.
Revenue target
The proposed national budget for FY26 sets the revenue collection target at Tk564,000 crore, which is equivalent to 9% of the country’s gross domestic product (GDP). In FY25 total revenue target was Tk541,000 crore, though in the revised budget, it was fixed at Tk518,000 crore.
Of this Tk564,000 estimation, Tk499,000 crore is expected to be collected through the NBR, while Tk19,000 crore will come from non-NBR tax and Tk46,000 is projected to come from non-tax receipts.
Ashikur Rahman, principal economist at PRI, told Dhaka Tribune: “The proposed national budget for FY2025 reflects a document marked by accounting precision but lacking in economic ambition. Given the current weakness of the fiscal framework, characterized by low revenue mobilization, rising debt servicing liabilities, and declining foreign aid disbursements, the budget takes a cautious posture.”
“The emphasis is clearly on austerity and consolidation—signaling that the government is prioritizing stabilization over stimulus,” he added.
Budget financing and reserve
The Tk226,000 crore budget deficit will be met from external and domestic sources.
According to the budget, financing from external sources Tk101,000 crore.
They plan on getting the rest from domestic sources another Tk125,000 crore will come, among which Tk104,000 crore will be taken from banking sources, which was Tk99,000 crore in the revised budget.
Finance Adviser Dr Salehuddin Ahmed said that the foreign exchange reserves rose to $27.4 billion in April due to encouraging growth in remittance inflows and stable export earnings.
The government is also expected to receive approximately $3.6 billion in budget support from various development partners by June this year, the adviser said.
GDP growth targets
The interim government has set a Gross Domestic Product (GDP) growth target of 5.5% for FY2025-26, which is slightly higher than the revised 5.25% for the current FY2024-25.
The economist said it was an ambitious target. Because international financial institutions, including the World Bank, IMF, and ADB, predict growth will remain below 5%.
Reduction in subsidies and incentives
The proposed budget for subsidies and incentives for the FY26 has allocated Tk89,162 crore, which was allocated Tk109,115 crore in the revised budget of the current fiscal year.
That is, the allocation has decreased by about Tk20,000 crore for subsidies and incentives, which is 11.3% of the total budget.
The proposed budget says that Tk27,990 crore has been allocated for subsidies and incentives in the public administration sector.
In addition, Tk581 crore has been allocated for defense, Tk1,118 crore for public order, Tk7,965 crore for the social security sector, and Tk17,241 crore for incentives and subsidies in the agriculture sector.
An inflation-neutral budget
Finance Adviser Dr Salehuddin Ahmed announced a target to maintain inflation at 6.5% for the 2025-26 fiscal year budget, emphasizing price control as the top priority.
Point-to-point inflation decreased from 10.89% in December 2024 to 9.17% in April 2025 and to 9.05% in May.
Projections indicate inflation could drop to 8% by June 2025 if current trends persist.
Zahid Hussain said: “Significant reforms have been brought in revenue policy. Earlier, our businessmen in the private sector had been getting various incentives and VAT exemptions for a long time. That has been reduced in this budget. This will have an impact on inflation.”
“However, I think that inflation cannot be reduced much through this budget. It can be called an inflation-neutral budget,” he quoted.
Budget deficit
The projected budget deficit stands at Tk226,000, down from Tk256,000 in the current fiscal year, representing 3.62% of the GDP. To bridge this gap, the government will depend on foreign borrowing, bank loans, and savings certificates.
Economists said that if the deficit that has been announced in the budget speech can be maintained until the end (FY26), it would be truly commendable, as the country's growth was too slow in FY25.
Private sector
From the next FY26, shoppers who want to buy from online platforms may face higher prices, as the NBR seeks to increase VAT on the commissions from product sales through e-platforms to 15% from 5%.
Similarly, VAT and SD have increased on products such as cigarettes, rods, cosmetics, soap, shampoo, children's toys, locally manufactured mobile phones, household plastic goods, LPG, locally made LPG cylinders, flats, ballpoint pens, helicopter services, and others.
Ashikur Rahman said: “This cautious approach comes at a cost. In a time when the economy faces multiple shocks—ranging from inflationary pressures to weak private investment—the absence of pro-growth measures or structural reform commitments suggests limited space for igniting renewed momentum. As such, this budget may succeed in meeting narrow fiscal targets, but it risks falling short in revitalizing the economy’s growth potential or addressing the needs of vulnerable citizens and job-seeking youth.”
Black money
The government has significantly increased taxes on undeclared wealth, known as black money, invested in the housing sector.
The change in tax rates made in the budget is geared towards discouraging the use of black money in real estate and bringing tax rates closer to market values, according to NBR officials.
Transparency International Bangladesh (TIB) has strongly condemned the decision to continue the provision for whitening black money in the proposed budget for the fiscal year 2025–26.
Criticizing this move by the interim government, the organization stated that it reflects a stance completely contrary to the objectives of state reform, particularly the core purpose of the Anti-Corruption Commission reform.
"Whatever way it may be interpreted, to undermine the core mandate of state reform in general and anti-corruption in particular, this shows how the interim government has surrendered to the real estate lobby's power to facilitate corruption," TIB Executive Director Dr Iftekharuzzaman said in a statement.
Social safety net
Amid rising living costs and growing economic challenges, the government has proposed expanding social safety net programs in the upcoming 2025–26 fiscal year, with increased allowances and a broader beneficiary base across ten key schemes.
Finance Adviser Salehuddin Ahmed announced that monthly payments for social safety programs will rise by Tk50–Tk100. The elderly allowance will increase from Tk600 to Tk650, while the monthly allowance for widows and abused women will grow from Tk550 to Tk650.
The monthly allowance for persons with disabilities will rise from Tk850 to Tk900. The Mother and Child Support Program will see an increase from Tk800 to Tk850, and allowances for marginalised communities will reach Tk650.
The total proposed allocation for social safety net programs in FY26 stands at Tk117,000 crore. Excluding pensions, the allocation is Tk81,297 crore. Interest premiums on savings instruments have been excluded from this year's calculation.
The social safety net operates through 140 programs under 26 ministries, with a total allocation of Tk136,000 crore for FY25, representing 17.06% of the national budget.
Budget cuts
For the first time in Bangladesh's history, the government has proposed a cut in the national budget's absolute size, setting the size at Tk790,000 crore for FY26—which is 0.9% lower than the current fiscal year's outlay of Tk797,000 crore.
This breaks a decades-long trend of year-on-year budget growth that began in FY1972-73.
Dr. Zahid Hussain, former lead economist, World Bank Bangladesh Office, told Dhaka Tribune: “If you calculate the revised budget, then this year's budget is not small. Moreover, the budget that was passed last time was an imaginary number of Tk797,000 crore. This time too. Because there has been a reduction of around Tk7,000 crore, which is Tk46,000 crore more than the revised budget.”
Although the tradition is that the size of a new budget will increase by 10% to 12% compared to the previous year's budget. Last year, it had increased by less than 8%.
