Big dreams, massive budget, extensive concessions

After 20 years, BNP has come to power with big dreams. People were looking forward to the budget. To fulfill everyone's dreams, the finance minister has announced a massive budget, offering significant tax concessions to appease all parties. However, there is also considerable skepticism about the implementation of this budget. The biggest question is where the funds for such a large budget will come from. A lot more tax revenue needs to be collected; even then, a significant deficit will remain.

For this reason, the finance minister is heavily relying on foreign loans. Nearly double the loans compared to the previous fiscal year will be needed, and obtaining substantial foreign loans will depend primarily on reforms.

The banking sector is in dire straits, inflation is still high, private investment has decreased, and global economic uncertainty remains. In such a scenario, the finance minister has spoken of fulfilling many dreams. He has even outlined where he wants to take the country in the next five years.

However, there is skepticism about how this will happen. There are dreams, but the framework for fulfilling those dreams is still unclear. Additionally, the global economy is still fraught with various uncertainties.
For over five consecutive years, the people of the country have faced various economic challenges.

Whether the budget is big or small doesn't concern the average person much; instead, they want relief. For this reason, they are relying on the new government. Everyone hopes that the government will not only talk about dreams but also take action.

In other words, the people of the country no longer wish to be misled by words or illusions.

Finance Minister Amir Khosru Mahmud Chowdhury yesterday named the budget for the fiscal year 2026-27 as ''Journey towards a Democratic, Humane, and Inclusive Economy. '' The speech was much more well-written compared to previous ones and was delivered directly as intended.

He mentioned targets of inflation at 7. 5 per cent and economic growth at 6. 5 per cent for the new fiscal year, both of which are quite ambitious. To achieve these targets, he outlined 10 priorities on which the budget is based. These include: development for all; quality education and healthcare for everyone; universal social protection; investment-driven employment and a production-oriented economy; deregulation, affordable and simplified business environment; stability in the financial sector; energy security; development of information and communication technology; management of life, nature, environment, and water resources; and transparent, efficient, and accountable institutions and administrative systems.

Additionally, the finance minister aims to bring creative or niche economies such as creative economies, sports economies, green economies, and blue economies into the very core of the national economy. Various tax concessions have been provided for this purpose.

For the next five years, the finance minister has outlined several targets as well. These include achieving GDP growth of 8. 5 per cent, bringing inflation down to 5 per cent, increasing investment to 40 per cent of GDP and direct foreign investment to 2. 7 per cent, raising the revenue-GDP ratio to 11 per cent and tax-GDP ratio to 9. 6 per cent, allocating 5 per cent of GDP to education and health sectors, and transforming Bangladesh into a 1 trillion dollar economy by 2034. A massive undertaking is needed to fulfill such large dreams. This is the major challenge for the finance minister and the government.

The finance minister has estimated total revenue for the next fiscal year at Tk 7.01 trillion. Out of this, Tk 6.9 trillion will be revenue income. 86.1 per cent of the government's total income will come from NBR's tax revenue, while 9. 4 per cent will come from other non-tax sources. Thus, the success of the budget largely depends on whether the government can achieve the set tax collection targets.

Looking at expenditure, the government plans to spend a total of Tk 9.3 trillion in the next fiscal year. Of this, Tk 6 trillion, or 64. 6 per cent of total expenditure, will go towards operational or current expenses. The allocation for development expenditure is Tk 3.16 trillion, which is 33. 7 per cent of total expenditure. This means that for every Tk 100 spent, Tk 65 will go towards current expenses while Tk 34 will go towards development activities.

However, the biggest pressure within operational expenses comes from interest on loans. Next fiscal year the government will have to spend Tk 1.2 trillion just on interest payments, which is 13. 6 per cent of total budget expenditure.

The government's income and expenditure deficit stands at Tk 2.4 trillion, which is about 25. 9 per cent of total expenditure. Simply put, the government will spend Tk 100 but earn only Tk 74. The remaining Tk 26 will have to be arranged through loans.

To cover this deficit, the government will have to borrow from both domestic and foreign sources. 46. 4 per cent of total deficit financing will come from foreign loans and 53. 6 per cent from domestic loans.

The government plans to borrow a net amount of Tk 1 trillion in foreign loans for the next fiscal year. Simultaneously, Tk 1.27 trillion will be borrowed domestically, with Tk 1.12 trillion coming from the banking system. In other words, 88 per cent of domestic loans will come from the banking sector. The remaining Tk 150 billion will come from non-bank sources, including Tk 85 billion from national savings certificates.

The key point is that according to the Revised Budget for 2025-26, the government is getting foreign loans amounting to Tk 580 billion. However, the target for the new fiscal year is Tk 1.09 trillion, meaning foreign loans need to be increased by about 90 per cent.

Thus, despite the size of the budget, its success will depend primarily on two factors: how much revenue the government can collect and how efficiently it can spend that money. If the expected revenue collection falls short or foreign loan inflows are disrupted, pressure will fall on the banking system. The government will then have to borrow from the banking system to cover the deficit, which would limit credit to the private sector, hamper investment, and keep inflation high.

Every time it's said that the focus will be on expanding the tax base rather than increasing tax rates. However, the tax base seldom expands significantly. This time around, the finance minister has reduced tax rates in many areas while increasing the tax base. Almost everyone has benefited from tax exemptions, but small businesses have been more affected by the increased tax base.

One of the most discussed proposals in this budget is relief in personal income tax. The tax-free income threshold for general taxpayers has been increased from Tk 3.5 trillion to Tk 3.75 trillion. Not only that, but the government has also announced a five-year roadmap.

According to this plan, the tax-free income threshold will be set at Tk 4.5 trillion by the fiscal year 2030-31. For women, senior citizens, people with disabilities, and freedom fighters, the tax-free income limit has been kept even higher, providing some relief to the middle class burdened by inflation. Another significant change is the announcement of the income tax structure for the next five years in advance, allowing individuals and businesses to plan easily for the future.

The budget has reduced source tax on 61 products, including rice, wheat, potatoes, fish, onions, garlic, oil, and sugar, aiming to lessen inflationary pressures in the market. However, whether this tax reduction benefit ultimately reaches consumers is the bigger question. In the country, even when taxes are reduced, prices often remain the same, and a large portion of the benefits still goes to businessmen.

To encourage the digital economy, the government has offered substantial tax benefits to freelancers, startups, and content creators. Freelancing income has been kept tax-free, tax exemptions have been provided on the income of content creators, and the turnover tax for startups has been set to zero. YouTubers, Facebook content creators, graphic designers, and freelancers may benefit directly from this, and undoubtedly young people will be pleased with this proposal.

Significant incentives have also been provided to the information technology sector. Taxes have been reduced or withdrawn from products like laptops, desktop computers, servers, monitors, and printers. Students and tech-dependent businesses will benefit from this.

A true revolution has occurred in the import and production of electric vehicles (EVs). Major concessions have been given in this sector, and taxes on EV charger imports have also been reduced. Additionally, it has been proposed to maintain a zero tax rate in the solar power sector until 2035. The goal is to reduce reliance on energy imports and increase the use of renewable energy.

For small and retail businesses, the budget has proposed a simplified tax system allowing them to pay taxes at a fixed rate. They will not be required to maintain VAT records or file returns. Taxes can be easily paid via bank or mobile financial services, reducing the hassle for business owners.

To expand the tax base, a proposal has been made to bring retail sellers under the tax system by withholding a 0. 20 per cent advance tax at the time of product supply. This means a tax of Tk 2 per Tk 1,000. Although this rate is very low, it is an attempt to bring retail business under the tax net.

A Business Identification Number (BIN registration) has been made mandatory for business bank accounts. Additionally, TIN will be required for the registration of motorcycles with an engine capacity of 150cc or more. Furthermore, a proposal has been made to make TIN mandatory when opening bank accounts.

An initiative has been taken to integrate data from national identity cards, bank accounts, utility services, and property information into a single comprehensive database. In the future, it remains to be seen whether the government can use this to reduce tax evasion.

As per tradition, a cabinet meeting was held yesterday morning at the National Parliament Building, presided over by Prime Minister Tarique Rahman, where the budget for the fiscal year 2026-27 was approved. Around 2: 45 PM, the finance bill was signed by President Md. Sahabuddin. The parliamentary meeting, chaired by Speaker Hafiz Uddin Ahmed, commenced at 3: 00 PM.

As Finance Minister, Amir Khosru Mahmud Chowdhury took almost four hours to present his first budget. After taking a break for the Asr and Maghrib prayers, the finance minister concluded his lengthy budget speech at 8: 10 PM. Including breaks, the total speech lasted five hours. This was likely the longest budget speech in Bangladesh''s history.

However, the longest continuous budget speech in history was delivered by former British Finance Minister William Ewart Gladstone. His speech on 18 April 1853, lasted 4 hours and 45 minutes. The previous year, another finance minister, Benjamin Disraeli, delivered a speech that lasted nearly five hours, although he had taken a break in between. In that sense, the Bangladesh Finance Minister will also find a place in history.

Many across the country may have listened to the finance minister's speech with much patience. They have been patiently waiting for good times for five years. The finance minister has also given much hope; now it remains to be seen how the new government and new finance minister can fulfill these hopes through the budget.