The Bangladesh FY2025–26 Budget is critical, coming at a time when the economy faces high inflation, rising debt, low investment, and post-election tension. Here’s a simple breakdown of the budget’s major points and what they mean for you.
Why Is This Budget So Crucial?
The FY2025–26 budget is being rolled out at a critical juncture. Bangladesh faces several economic challenges, including
High Inflation
Rising Debt Pressure
Low Private Investment
Post-Election Economic Strain
This budget isn’t just about numbers; it’s a strategic response to the country’s economic survival and recovery. As a taxpayer, business owner, policy analyst, or concerned citizen, you need to pay attention to what’s inside.
Here’s your easy-to-digest breakdown of the most important parts of the budget, along with expert insights from the Centre for Policy Dialogue (CPD).
Macroeconomic Ambitions: Bold or Too Bold?
The government is projecting a GDP growth of 6.75% in FY2025–26, but many economists, including CPD, believe a more realistic estimate is 5.5%. Key challenges include:
Slow post-pandemic recovery
Weak private sector confidence
Inflation reducing household purchasing power
Key Targets:
Inflation: Targeted at 6.5%, down from 9.0% last year
Exchange Rate: Expected to hit BDT 128.2 per USD
Reserves: Aiming for USD 34 billion
Budget Deficit: Set at 5.2% of GDP
Reality Check:
The average inflation rate in FY25 exceeded 10%, so the 6.5% target seems overly optimistic unless substantial price control measures are introduced.
Revenue Targets and Budget Financing: Ambition vs Execution
The government plans to raise Tk. 5,41,000 crore in revenue, with Tk. 4,80,000 crore coming from NBR taxes.
However, CPD experts believe that to balance the budget, an additional Tk. 128,000 crore is needed, translating to a 29.4% growth in tax revenue. But the government’s target growth is only 8.9%.
Revenue Breakdown:
VAT: Tk. 1,68,200 crore
Income Tax: Tk. 1,61,100 crore
Import Duty: Tk. 52,000 crore
Excise & Supplementary Duties: Tk. 81,300 crore
Non-NBR Taxes: Increased by 31%
Budget Financing Plan:
Bank Borrowing: Tk. 104,000 crore
Foreign Loans: 42.5% of the deficit
Non-Bank Borrowing: Tk. 36,000 crore
Concerns:
Heavy reliance on domestic bank borrowing could restrict credit access for the private sector.
ADP Allocation and Mega Projects: Deadline Drama
The Annual Development Programme (ADP) is set at Tk. 2,30,000 crore (3.7% of GDP). Key ministries will receive 73.3% of the ADP allocation.
Top Mega Projects in FY26:
MRT-6 Expansion
Rooppur Nuclear Power Plant
Padma Bridge Rail Link
Matarbari Deep Sea Port
However:
None of the 8 major projects planned for completion in FY25 are expected to finish on time.
Execution risk is high, as only 60–70% of ADP funds are typically utilized.
Income Tax Changes: Who Will Pay More
Individual Income Tax (AY 2025–26):
Tax-Free Threshold: Tk. 3,50,000
Minimum Tax: Tk. 1,000
Top Slab Rate: 30% (reintroduced)
From AY 2026–27:
Threshold increases to Tk. 3,75,000
Slab System reduced from 7 to 6
Impact:
Middle-income earners will face a higher effective tax rate than high earners due to changes in tax slabs.
A person earning Tk. 15 lakh/year will now pay Tk. 109,000, up from Tk. 93,000.
Corporate Tax & TDS Reforms: Major Overhaul
Corporate Tax Rate (Standard):
Listed Companies: 20% (if all income is transacted via banking channels)
Non-listed Companies: 27.5%
Merchant Banks: Reduced from 37.5% to 27.5%
TDS and Advance Income Tax (AIT) Revisions:
Digital services, rent, and consultancy services now face new TDS rates.
AIT on commercial vehicles has been raised by 60–88%, impacting logistics and SMEs.
Indirect Tax Reforms: Who Bears the Burden?
VAT Increases:
Construction Services: 7.5% → 10%
Plastic Tableware: 7.5% → 15%
Online Sales Commissions: 5% → 15%
VAT Exemptions Withdrawn:
Durable goods like ACs and refrigerators
Medical Sutures and diagnostic reagents
Extended VAT Exemptions:
Sanitary Napkins
Pharma Raw Materials
Fertilisers and Pesticides
Middle-class consumers will likely feel the pinch, especially for durable goods and healthcare.
Sector-Wise Allocation: Prioritizing Key Area
Budget Share (% of Total):
Education & Technology: 14.3%
Transport & Communication: 12.8%
Health & Family Welfare: 5.4%
Agriculture: 4.7%
Public Administration: 7.5%
Sectoral Observations:
Education gets the highest increase in allocation (25.1% of total incremental funds).
Health received a positive 30.4% increase, while Power & Energy got less than expected despite rising demand.
Social Safety & Equity Concerns: Still a Long Way to Go
The Social Safety Net Budget is Tk. 1,26,000 crore (around 2.5% of GDP). However, many programs remain underfunded or poorly managed.
Concerns:
High leakage in cash-based transfers.
Taxpayer base remains stagnant, with only 1.3% of the population filing returns.
FAQs: Understanding the FY 2025–26 Budget Ordinance
1. Is the 6.75% GDP growth realistic?
Answer: Most economists, including CPD, believe a growth of 5.0–5.5% is more realistic due to weak investment and high inflation.
2. Who benefits most from the personal income tax changes?
Answer: Low-income individuals see some relief, but middle-income earners face a heavier tax burden due to changes in the tax slab system.
3. Are mega projects delayed again?
Answer: Yes, none of the 8 major projects due for completion in FY25 are expected to be finished by FY26.
4. How are digital services being taxed now?
Answer: Digital platforms now face up to 15% VAT and revised TDS rates, which increases compliance and costs for businesses.
5. Will prices increase due to this budget?
Answer: Yes, VAT hikes and duty withdrawals will likely drive up prices for durable goods, construction services, and plastic products.
Final Thoughts: A Budget of Balance, Not Brilliance
The FY 2025–26 Budget Ordinance is an attempt to restore macroeconomic order, but it has mixed results:
Wins:
Cautious management of the fiscal deficit
Attention to the education and health sectors
Progress on tax digitalization and simplification
Misses:
Unrealistic revenue goals
Weak social protection programs
Crowding-out risks for private investment
Delays in major infrastructure projects
What Should You Do Now?
Taxpayer: Recalculate your taxes with the new slabs.
Business Owner: Review new TDS, AIT, and VAT changes before July.
Policy Enthusiast: Track budget implementation on a monthly basis.
Investor: Pay attention to potential tax incentives for capital market players.
