Ambitious budget counts for little sans effective implementation

The proposed national budget for FY2026-27, amounting to Tk.938,000 crore, is the largest in Bangladesh's history. Presented by Finance and Planning Minister Amir Khosru Mahmud Chowdhury, the budget attempts to project an image of confidence at a time when the country's economy continues to face multiple challenges. The government has outlined ten broad objectives, including accelerating private investment, generating employment, ensuring financial stability, improving healthcare and education, strengthening social protection, and promoting inclusive growth.

On paper, the vision is attractive. The budget seeks to create a business-friendly environment, modernize public services, encourage foreign investment, support freelancers and the creative economy, and improve the country's human capital. It also proposes the highest-ever allocations for health and education as shares of GDP while increasing social security spending by nearly 14 percent. However, Bangladesh's economic history teaches an important lesson: the success of a budget is not determined by its size, but by its implementation. The FY2026-27 budget will now truly face the implementation test. 

The first challenge lies in the government's revenue assumptions. The budget expects total revenue collection of Tk.695,000 crore, of which Tk.604,000 crore is supposed to come from taxes and duties collected by the National Board of Revenue (NBR). This target appears highly ambitious considering that the NBR reportedly missed its collection target by nearly Tk.1 lakh crore in the outgoing fiscal year. The concern becomes even more serious when viewed in the broader context of Bangladesh's taxation system. For more than a decade, revenue collection targets have repeatedly been missed. The country's tax-to-GDP ratio remains among the lowest in the world. 

The government now hopes to raise tax-to-GDP ratio to 8.84 percent despite the fact that it reportedly fell to around 6.8 percent during FY2025-26. But this raises an obvious question about the source of the additional revenue required. The answer cannot simply be increased pressure on existing taxpayers. Bangladesh's formal tax base remains narrow, and the burden is largely carried by salaried employees, professionals, and small business owners. Without significantly expanding the tax net and reducing tax evasion among high-income groups, achieving the ambitious revenue target may prove difficult.

The proposed budget is being marketed as a pro-business budget. Several measures have been welcomed by the business community. The government's commitment to maintaining predictable income tax rates over the next five years provides certainty for investors.

No investor decides to invest merely because a tax rate is lower. Businesses invest when they believe their operations can run safely and predictably. Unfortunately, concerns regarding extortion, criminal activities, corruption, disruptions in transportation, attacks on commercial establishments, mob violence and weaknesses in public security continue to create uncertainty in many parts of the country. Many entrepreneurs today argue that their greatest challenge is not obtaining licenses or understanding tax regulations. Their greatest concern is whether they can operate without interference and insecurity.

Foreign investors are even more sensitive to such issues. They evaluate political stability, security conditions, contract enforcement, and the rule of law before committing capital. Therefore, if Bangladesh genuinely wants to attract substantial domestic and foreign investment, improving law and order must become an economic priority rather than merely a policing issue. A business-friendly budget cannot succeed in an environment where businesses do not feel secure.

The banking and financial sectors continue to struggle with poor governance, defaulted loans, liquidity shortages, and declining public confidence. Thousands of depositors, particularly from middle-income families, have faced immense difficulties in accessing their own savings from troubled banks and non-bank financial institutions. For many families, these savings were intended for children's education, retirement security, healthcare expenses, or future investments. Yet many remain uncertain about when or whether they will recover their money. Hence, Rather than only supporting this financial sector with additional fund as stimulus, the budget could have reflected few additional measures to improve this failing sector.

The middle-income group of Bangladesh deserves particular attention of the government because it faces challenges from multiple directions simultaneously. Over the past several years, the cost of living has risen dramatically. Fuel prices, electricity tariffs, LPG cylinder prices etc. have increased multiple times and the current government is also finding increasing the utility prices a convenient economic option. These increases inevitably raise production and distribution costs throughout the economy, leading to higher prices for food and consumer goods. As a result, households face mounting pressure simply to maintain their existing standard of living. 

At the same time, incomes have not increased at a similar pace. For many middle-income families, salaries and earnings have remained relatively stagnant during the last five years while expenses related to housing, education, healthcare, transportation, and daily necessities have climbed steadily. The purchasing power of this group has therefore weakened significantly.

Yet it is this very segment of society that bears a large share of the country's tax burden. Unlike wealthy individuals who often possess sophisticated means of tax planning, or low-income households that fall outside the tax net, middle-income taxpayers are highly visible to revenue authorities. Consequently, they frequently become the easiest targets for increased tax collection efforts. Yet many taxpayers complain about harassment by tax officials, complex procedures, and excessive compliance requirements.

If the government attempts to achieve its ambitious revenue targets primarily by increasing pressure on existing taxpayers, the middle class will suffer further. The middle class constitutes the backbone of Bangladesh's formal economy. They are the country's largest taxpayers, major consumers, skilled professionals, entrepreneurs, and contributors to national productivity. Weakening this group would ultimately undermine economic growth itself.

The government's social priorities deserve recognition. Increased allocations for education and healthcare, support for women's empowerment, plans to recruit more healthcare workers, expansion of primary health services, issuance of e-health cards, and efforts to increase women's participation in the health workforce are all commendable initiatives. Similarly, benefits proposed for senior citizens also reflect an effort to address the needs of vulnerable populations.

The government's intention to support freelancers, content creators, and non-traditional economic sectors also demonstrates an understanding of changing global economic realities and it is one key characteristics of this budget. Investments in artificial intelligence, technology-based education, cultural industries, tourism, and sports development could potentially create new opportunities for younger generations. However, every one of these initiatives depends on implementation capacity.

Too often, budgets have been evaluated by the size of allocations rather than the effectiveness of outcomes. The FY2026-27 budget offers an ambitious vision for the country's future. But if the government truly wishes to transform this budget into a vehicle for economic progress, it must focus relentlessly on implementation as Bangladesh needs a budget remembered for delivering results. We hope the courageous and people-oriented leadership of Prime Minister Tarique Rahman will contribute greatly in improving the lives of the Bangladeshi people and this budget for FY2026-27 will turn into a success story.