BN Report
Nearly a year after stepping into the wreckage of a crumbling economy, the interim government on Monday unveiled its first national budget—a restrained, risk-conscious document crafted in full view of the nation’s economic fragilities.
With institutions weakened, banks running low on liquidity, foreign reserves rapidly depleting, and inflation stubbornly high, Finance Adviser Dr Salehuddin Ahmed presented the Tk 7.9 trillion budget for FY 2025–26. Unlike past budget days marked by political spectacle, his delivery was measured and modest—broadcast on state media without fanfare, grounded in realism rather than rhetoric.
While the interim government has succeeded in stabilizing parts of the administration and easing immediate pressures, core issues linger: widespread unemployment, persistent inflation, stagnating private investment, and mounting unrest within the National Board of Revenue (NBR).
The budget, as presented, walks a fine line—aiming to stabilize inflation while cautiously reviving economic momentum. Its fiscal stance veers away from traditional growth obsession toward what appears to be an inflation-neutral strategy. Yet, success will depend on revenue collection, deficit financing, and the credibility of reforms.
A Tk 2.26 trillion budget deficit—though not alarming on its own—raises concerns due to the projected domestic borrowing reliance. With 83 per cent of this borrowing expected from the banking system, risks of crowding out private-sector lending loom large, potentially stifling investment and job creation.
Though inflation remains above 9 per cent, the finance adviser credited recent moderation to contractionary monetary policy and tighter fiscal discipline. He expressed hope that inflation could dip to 8 per cent by June, supported by a stabilizing exchange rate and rising imports. However, no mention was made of entrenched supply-chain distortions or market syndicates that drive food price hikes.
Employment, too, remains a critical concern. The budget offers limited concrete measures to significantly accelerate job creation. While there are signals to attract private investment—such as pledges of stable inflation and favorable interest rates—structural reforms to meaningfully improve the business climate are lacking.
In a nod to youth and innovation, the budget allocates Tk 1.0 billion each for new entrepreneurs and startups, alongside another Tk 1.0 billion for a youth festival. These symbolic initiatives may stir entrepreneurial energy, though their macroeconomic impact is likely to be modest.
Public-sector employment may see a small boost through the Tk 2.3 trillion Annual Development Programme (ADP), but without a robust revival of private investment, widespread job creation remains unlikely.
On the revenue front, the government aims to mobilize an ambitious Tk 5.64 trillion, with Tk 4.99 trillion expected from the NBR—equivalent to 9 per cent of GDP. However, the NBR’s historic performance raises doubts about such a leap. Internal unrest over proposed departmental restructuring further complicates the outlook.
The adviser reaffirmed the government’s commitment to direct tax reforms and modernization, including mandatory online return filing for individuals and businesses. The tax-free income threshold was modestly raised to Tk 375,000, while the lowest tax slab increased from 5 to 10 per cent. A Tk 1,000 minimum tax for first-time taxpayers was also introduced to widen compliance.
Beyond taxation, Dr Ahmed called for deep institutional reforms. Eleven commissions have been proposed to address longstanding issues, from corruption and judicial independence to electoral and land governance.
Strikingly, he acknowledged years of financial mismanagement, saying “millions of taka have been siphoned off from banks,” and criticized past governments for masking the true scale of the non-performing loan crisis.
Social protection sees some enhancement, with increased beneficiaries and per-capita allowances. Yet, no roadmap was offered to address inefficiencies that have long plagued safety-net programmes.
Consumers may find modest relief through exemptions on VAT for essential items such as LNG, liquid milk, sanitary napkins, ballpoint pens, and computer monitors. Additionally, the excise duty threshold on bank balances was raised to Tk 300,000 from Tk 100,000.
Efforts to revitalize the capital market were also signaled. The tax differential between listed and unlisted firms widened by 7.5 percentage points, and the source tax on brokerage was reduced to 0.03 per cent. But such steps may have limited effect without broader market reforms, given the large number of underperforming listed companies.
This budget, framed in the aftermath of political upheaval and economic disarray, avoids headline-chasing growth targets. Instead, it sets the groundwork for repair and reform—if intentions can be translated into action.
