The FY26 budget aims to raise the revenue-GDP ratio to 9% by increasing tax and non-tax revenue. To meet this target, it projects a 33% growth in revenue — a goal experts at a discussion on Monday called not just challenging but overly ambitious, given the modest 10% and 12% growth recorded in FY23 and FY24.
They were speaking at a post-budget 2025-2026 discussion titled “Budget Insights: Challenges and Opportunities Ahead” on Monday, jointly organized by the Metropolitan Chamber of Commerce and Industry, Dhaka (MCCI) and the Policy Research Institute (PRI).
Zaidi Sattar, chairman of the Policy Research Institute (PRI), said that tax and non-tax revenue are expected to increase, raising the revenue-GDP ratio to 9% of GDP. This will be the most challenging part of the budget, as far as realization is concerned.
“Growth target for FY2026 set at 5.5%. This is feasible, as this growth rate will require the gross domestic investment (GDI) rate to be at least 27.5% (assuming ICOR=5), which is quite likely in FY2026. Other growth drivers will be export and remittance performance. The FY2026 budget lacks economic reforms that are dynamic enough to fuel high growth. Nevertheless, the 5.5% target is feasible, as GDI is likely to be higher than 27.5% of GDP, even with all the negative investment trends, given that FY25 GDI was 29.4% of GDP,” he explained.
Bazlul Haque Khondker, research director at PRI, delivered the keynote presentation.
“The projected revenue growth of 33% appears overly ambitious considering recent trends of 10% and 12% in FY23 and FY24, respectively, and an estimated value of 4% in the actual budget of FY25.”
To address the unrealistic revenue collection target, he also said that the revenue growth target of 33% in budget FY26 is highly optimistic given the recent trend and only 4% growth in the estimated actual budget of FY25.
“No clear structural shift in tax policy is evident. The system remains regressive, heavily reliant on indirect taxes and trade taxes, disproportionately burdening low- and lower-middle-income groups, and restraining private initiatives. Rationalization of tax exemption appears a missed opportunity,” he added.
The report stated that the increase in advance tax aims to recover the revenue lost to VAT evasion but can ultimately lead to consumer price hikes and further inflationary pressure.
The gap between policy and performance stems from structural frictions such as widespread exemptions, a dominant informal sector, weak enforcement, and low compliance.
Without addressing these core issues, tax reforms will remain largely on paper, with little impact on actual revenue generation or fiscal capacity.
Regarding poverty, it said: “A 10% income loss pushes an additional 10% of people into poverty. The World Bank has expressed concerns that an additional 3 million people may go into extreme poverty in FY25. The national poverty rate is projected to rise to 22.9% in 2025, up from 18.7% in 2022, while the share of people living in extreme poverty, those earning below $2.15 a day, is expected to nearly double to 9.3%.”
MCCI president Kamran T Rahman said that as Bangladesh navigates challenges such as rising inflation, sluggish investment trends, high bank lending rates, and the impending graduation from the Least Developed Country status in 2026, the budget plays a pivotal role in setting the course for sustainable economic growth.
“However, as highlighted by MCCI in our response to the Finance Ordinance 2025, certain measures—such as the increased government borrowing target from the banking system—pose risks like the crowding-out effect, which could limit private sector investment, and potential inflationary pressures that may burden consumers.”
“We remain deeply concerned about certain aspects of the budget—most notably, the proposed increase in turnover tax from 0.6% to as high as 1% across almost all sectors. We contend that this shift is inconsistent with sound tax policy principles, particularly those focused on encouraging formalization and lowering business costs. Such a measure risks penalizing compliant taxpayers, especially SMEs and low-margin businesses, and may hinder overall business growth and investment confidence.”
“We respectfully urge the government to reconsider and review this proposal in consultation with the private sector to ensure that the tax structure remains growth-friendly and equitable,” he added.
Anisuzzaman Chowdhury, special assistant to the chief adviser, attended the event as the chief guest.
