Assumptions about inflation, growth, investment and revenue collection in the proposed budget are ambitious as they mismatch with Bangladesh's current economic realities, says a policy think-tank, while appreciating numerous reform measures being introduced.
Presenting its post-budget analysis at a hotel in Dhaka on Friday, the Centre for Policy Dialogue (CPD) also voiced skepticism over the decision to allowing legalization of undisclosed income through property transactions-a fiscal liberty which it says risks weakening "tax justice".
Appreciating reforms set out in the proposed FY2026-27 budget, CPD Executive Director Fahmida Khatun and Distinguished Fellow Professor Mustafizur Rahman said success of the initiatives would depend largely on effective implementation and institutional capacity.
"The assumptions underpinning the budget are highly ambitious. Given the current economic situation, their implementation will be challenging," said Mustafizur Rahman.
According to the CPD, the government's targets for economic growth, inflation reduction, revenue mobilisation and private investment do not fully reflect prevailing economic realities.
The budget projects gross domestic product (GDP) growth of 6.5 per cent in FY2026-27, compared with a provisional growth estimate of just above 4.0 per cent in the outgoing fiscal year. The policy think-tank questions the feasibility of such a sharp acceleration, noting that private investment remains subdued, credit growth is weak and business confidence has yet to recover fully.
The think-tank is also in doubt about government's ability to reduce inflation--which now hovers over 9.0 per cent--to 7.5 per cent next fiscal year.
Fahmida Khatun observes that inflation remains largely driven by supply-side factors, requiring policy responses beyond conventional monetary tightening.
"This is a large budget and government expenditure will increase. If spending does not enhance productivity, it could further fuel inflation," she predicts.
The proposed budget outlay is 18.7-percent higher than that of the current fiscal year. According to CPD view, higher public expenditure can help stimulate economic activity only if it creates productive capacity through infrastructure development, employment generation and support for private-sector investment.
"Otherwise, the increased spending may merely add to inflationary pressures without generating sustainable economic benefits."
It notes that average inflation stood at 8.6 per cent through May on a 12-month moving average basis, while point-to-point inflation reached 9.4 per cent, indicating that price pressures remain stubbornly high.
Ensuring adequate food supplies, stabilising energy markets and improving supply chains would be essential for bringing inflation under control.
It also suggests that Bangladesh Bank may need to maintain a contractionary monetary stance for a longer period to anchor inflation expectations.
Private investment remains another major concern. The budget projects private investment at 21.3 per cent of GDP next fiscal year, only marginally higher than the revised estimate of 21.2 per cent this year.
The CPD notes that private investment had remained around 23-24 per cent of GDP for many years before declining recently. It also questions government's target of 9.4-percent growth in private-sector credit when actual credit growth stood at only 4.75 per cent in April.
"To achieve both higher growth and lower inflation, restoring investor confidence will be critical," Fahmida opines.
On fiscal issues, the CPD criticises the provision allowing individuals to legalise undisclosed income through property transactions by paying applicable taxes.
"We have always said that, economically, it is not justified," Mustafizur told the function.
He argues that previous opportunities to whiten black money had generated very limited revenue while creating significant moral hazards.
According to him, repeated amnesty schemes discourage honest taxpayers and undermine compliance by creating expectations that tax-evaders may eventually receive preferential treatment.
"Those who are paying taxes properly may think that if they delay payment, they may later receive additional benefits. This creates a problem."
The measure also sends the wrong signal politically, he argues, because ordinary citizens may perceive that individuals involved in corruption or tax evasion are being rewarded.
"So, economically, morally and politically, we have opposed it from all three perspectives."
However, Mustafizur acknowledges that distortions in land-valuation policies have contributed to the creation of undisclosed income in property transactions. He welcomes the government's plan to update mouza value more frequently./
Echoing the concern, Fahmida says the provision undermines tax fairness by creating inequality between compliant taxpayers and those who previously avoided their obligations.
On taxation, the Centre notes that although the tax-free income threshold has been increased from Tk 350,000 to Tk 375,000, the adjustment falls short of compensating for inflation. According to the think-tank, inflation-indexed relief would have required the threshold to be raised to at least Tk 380,000.
Nevertheless, the CPD welcomes the government's five-year personal income-tax roadmap, which includes a gradual increase in the tax-free threshold to Tk 400,000 by assessment year 2028-29 and the introduction of a new 35-percent tax slab for high income-earners.
The organisation also argues that Bangladesh's corporate tax rate of 27.5 per cent for non-listed companies remains higher than those of several regional competitors, potentially affecting the country's attractiveness as an investment destination.
In the social sector, CPD welcomes a sharp increase in health spending. The proposed health budget has risen 50 per cent to Tk 628.52 billion, while the development allocation has doubled to Tk 350.26 billion.
However, it notes with concern that out-of-pocket healthcare expenditure remains exceptionally high at 79 per cent of total health spending, the highest in South Asia. It also highlights weak utilisation of development funds in the health sector, with implementation rates falling significantly over the past decade.
The think-tank calls for higher taxes on tobacco products, recommending an increase in corporate tax on tobacco manufacturers from 45 per cent to 55 per cent and a rise in the surcharge from 2.5 per cent to 7.5 per cent.
Regarding Bangladesh's preparations for graduation from the least-developed country (LDC) category, the CPD sees important policy gaps in the budget.
It notes the absence of a dedicated tariff-rationalisation roadmap despite the country's planned transition from LDC status and urges the government to outline clear strategies to reduce anti-export bias and prepare industries for the loss of trade preferences.
The Centre also points to a lack of clarity regarding Bangladesh's commitments under the Agreement on Reciprocal Trade with the United States and calls for greater transparency regarding future policy directions.
Summing up the assessment, Fahmida says the budget represents the new government's first major opportunity to demonstrate its capacity to steer the economy through a difficult period.
"Though the budget is much larger than previous ones, its success will ultimately depend less on its size than on its quality of execution," she notes.
According to them, stronger institutions, improved governance, realistic targets and effective implementation will be essential if the budget is to achieve its stated objectives of stabilising the economy, reducing inflation and accelerating growth.
bdsmile@gmail.com