The proposed National Budget for FY2026–27 contains several important reform initiatives and broadly reflects the government’s stated priorities relating to investment, employment, entrepreneurship, human development and social protection. However, many of its macroeconomic and fiscal targets appear optimistic, while several structural constraints and implementation weaknesses remain unresolved. Its success will depend on whether the government can mobilise revenue, revive private investment, contain inflation, implement development projects efficiently and generate employment at the required scale.
In this context, the Centre for Policy Dialogue (CPD) organised a media briefing titled ‘CPD’s Analysis of the National Budget FY2026–27’ on Friday, 12 June 2026, under its Independent Review of Bangladesh’s Development (IRBD) programme.
Dr Fahmida Khatun, Executive Director of CPD, presented the analysis on behalf of the CPD IRBD Team. She observed that the underlying philosophy of the proposed budget appears to be one of economic recovery through private-sector-led growth, human development and social protection. This orientation broadly corresponds with the government’s commitments relating to employment generation, investment, entrepreneurship and the development of the social sectors. However, implementation capacity and institutional effectiveness will be critical to translating these commitments into measurable outcomes.
On the macroeconomic front, Dr Khatun observed that the targets for FY2026–27 appear optimistic. The budget targets GDP growth of 6.5 per cent, whereas the Bangladesh Bureau of Statistics provisionally estimates growth in FY2025–26 at 4.14 per cent. The private investment-to-GDP ratio is projected to rise only marginally, from 21.2 per cent to 21.3 per cent, but achieving this would require an additional BDT 165,767 crore in private investment. Whether such an increase can be realised under the prevailing investment climate remains uncertain.
Private-sector credit growth remained below 5 per cent in April 2026, against the FY2026–27 target of 9.4 per cent. Dr Khatun noted that weak business confidence, energy shortages, high lending rates, sluggish exports and banking-sector vulnerabilities continue to constrain investment. Heavy government borrowing from domestic banks could further tighten liquidity, increase lending rates and crowd out private investment at a time when firms are already reluctant to expand their operations.
The inflation target of 7.5 per cent will also be difficult to achieve. Average inflation stood at 8.63 per cent in May 2026 on a 12-month moving-average basis, while point-to-point inflation was 9.42 per cent. Dr Khatun stressed that containing inflation will require adequate and affordable supplies of food and energy, prudent monetary management, stronger supply chains and the productive use of public expenditure. Higher government spending that does not increase output, productivity, investment and employment could create additional inflationary pressure.
Regarding the fiscal framework, Dr Khatun identified revenue mobilisation as one of the budget’s most significant implementation risks. The FY2026–27 revenue target of BDT 695,000 crore represents an increase of 18.2 per cent over the revised FY2025–26 target. However, compared with CPD’s projection for actual revenue collection in FY2025–26, the target implies growth of approximately 54.4 per cent and would require the mobilisation of around BDT 245,000 crore in additional revenue.
On personal income tax, Dr Khatun stressed that the tax-free income threshold should adequately reflect the erosion of purchasing power caused by inflation. Although the threshold has been raised from BDT 3.50 lakh to BDT 3.75 lakh, CPD estimated that an inflation-adjusted threshold would be approximately BDT 3.80 lakh. The proposed revision therefore provides limited real relief to lower-income taxpayers.
The five-year corporate tax roadmap could provide a degree of medium-term policy predictability. However, CPD cautioned that maintaining the relatively high tax rate for non-listed companies until Assessment Year 2030–31 could affect Bangladesh’s competitiveness. The analysis recommended widening the tax-rate differential between listed and non-listed companies, preferably by reducing the rate for listed entities, to encourage more firms to enter the capital market. Medium-term tax roadmaps should also remain flexible and subject to periodic review in response to changing economic conditions.
The analysis identified several potentially useful tax-administration measures, including year-round online submission of corporate and individual tax returns, an automated and faceless tax-refund system with direct bank transfers, and greater data integration between the National Board of Revenue and other public and financial institutions. If properly implemented, these measures could reduce delays, strengthen compliance, broaden the tax base and improve administrative efficiency.
At the same time, Dr Khatun cautioned against provisions allowing buyers and sellers of land, buildings and apartments to regularise previously undisclosed transaction values. Although these provisions may generate some additional revenue, repeated opportunities for regularisation could create moral hazard, weaken tax justice and encourage deliberate underreporting in anticipation of similar facilities in the future.
On the Annual Development Programme, Dr Khatun underscored that the planned expansion of development expenditure is being proposed from a very weak implementation base. The ADP contains 1,063 unapproved projects without allocations and 77 projects receiving token allocations of BDT 1 lakh or less. Such practices weaken project prioritisation and spread limited public resources across too many projects.
The pace of implementation of many carry-over and concluding projects also remains slow. A large number of projects have experienced repeated extensions, increasing both their implementation periods and costs. CPD recommended directing adequate resources towards projects that are close to completion and capable of producing significant employment and economic benefits. Better project selection, timely execution, cost control and effective utilisation of resources will be more important than merely increasing the size of the ADP.
While discussing investment and employment, Dr Khatun observed that the budget is broadly consistent with the government’s investment-led employment strategy. It includes tax relief, financing facilities and other measures for start-ups, SMEs, freelancers, entrepreneurs, technology-based industries and businesses outside Dhaka and Chattogram. However, the scale and design of these initiatives appear inadequate compared with the government’s ambitious employment targets.
Several major employment commitments remain insufficiently addressed, including large-scale skills-development programmes, a national job-matching platform, stronger labour-market institutions and measures to expand overseas employment. Fiscal incentives alone are unlikely to produce the expected employment outcomes unless energy shortages, financing constraints, weak investor confidence, skills mismatches and the high cost of doing business are addressed.
The allocation for the Ministry of Youth and Sports has increased substantially, while the budget contains financing measures for youth-led start-ups, women entrepreneurs, SMEs and creative-economy activities. However, previous development allocations for the ministry were reduced significantly at the revised-budget stage, while its ADP implementation rate remained only about 37 per cent during July–April of FY2025–26. The employment impact of the new measures will therefore depend on programme design, implementation capacity, market access, relevant skills development, digital infrastructure and institutional coordination.
On trade and industrial development, the budget contains measures intended to support domestic manufacturing, import-substituting industries, export-oriented production and the digital economy. However, it does not present a dedicated tariff-rationalisation roadmap for Bangladesh’s forthcoming graduation from least developed country status.
A clearer medium-term strategy is required to rationalise para-tariffs, reduce anti-export bias, prepare industries for the erosion of preferential market access and facilitate compliance with post-graduation trade rules. Measures to protect domestic industries should also be carefully balanced against the need to improve competitiveness and prevent prolonged dependence on tariff protection.
In the power and energy sector, CPD highlighted a continuing imbalance between fossil-fuel and renewable-energy allocations. Fossil-fuel-based generation projects account for approximately 98 per cent of generation-sector ADP allocations, compared with only 2 per cent for renewable-energy projects. Allocations for transmission projects have also declined despite the stated objective of modernising the national grid.
The increased emphasis on domestic gas exploration and the absence of new coal- or LNG-related development projects were identified as potentially important changes. However, a more decisive shift in ADP priorities towards renewable energy and grid modernisation is required. Subsidy reforms should not transfer additional costs to consumers; rather, the government should address sectoral inefficiencies and gradually phase out costly capacity-payment arrangements associated with fossil-fuel-based power generation.
Regarding local government and rural development, CPD noted that the ADP includes numerous projects for roads, bridges, markets and other forms of rural connectivity. However, projects addressing drainage, sanitation and waterlogging have not received adequate attention, while the number of projects related to climate and disaster resilience has declined.
The budget also contains limited measures for implementing the recommendations of the Local Government Reform Commission, including proposals relating to innovation, digital public services and institutional capacity. Meaningful decentralisation will require greater fiscal resources, stronger local institutions and more independent, transparent and accountable mechanisms for distributing development funds.
On gender-responsive budgeting, Dr Khatun noted that gender-relevant allocations have increased to BDT 326,059.8 crore, equivalent to 34.8 per cent of the total budget. However, total utilisation of gender-relevant allocations stood at approximately 82 per cent in FY2024–25, while development-budget utilisation was only 66 per cent—the lowest level in five years.
Several targeted programmes for women have received reduced allocations or have been discontinued, while discrepancies remain in gender-budget reporting. Greater attention is therefore needed to implementation quality, programme continuity, monitoring and the reliability of data used to assess gender-related outcomes.
CPD also highlighted the limited fiscal support available for parliamentary capacity and institutional strengthening. Parliament-related divisions receive only 0.036 per cent of the national budget, while development expenditure remains minimal. The project intended to strengthen Parliament’s institutional capacity is unlikely to be completed on schedule. Greater support is required for long-term capacity building, institutional development and parliamentary modernisation.
In its concluding assessment, CPD observed that the proposed budget contains a number of forward-looking measures and reflects an intention to pursue recovery through private-sector-led growth, human development and social protection. However, its effectiveness will ultimately depend on realistic target setting, quality of execution, institutional capacity, accountability and sustained structural reforms. Higher expenditure must produce measurable improvements in productivity, investment, employment and public welfare.
A question-and-answer session followed the presentation. Journalists raised questions about the feasibility and sources of the revenue target, the inflationary implications of higher public expenditure and tax concessions, the risks associated with domestic and foreign borrowing, and whether the economy could absorb the proposed budget. They also asked about the fairness of the tax measures, the continued scope for regularising undisclosed money, debt sustainability, investment constraints, youth unemployment, recent job losses and the reforms required to attract domestic and foreign investment.
Professor Mustafizur Rahman, Distinguished Fellow of CPD, responded to the broader macroeconomic, fiscal and governance issues. He observed that the budget seeks to promote growth, inclusion and environmentally sustainable development, but its targets are based on an overly optimistic FY2025–26 baseline. He stressed that revenue, investment, credit, export and inflation targets should have been set on more realistic assumptions.
Professor Rahman noted that tax concessions and investment incentives may support economic activity over time, but are unlikely to generate the required revenue immediately. If revenue collection falls short, greater reliance on domestic borrowing could crowd out private investment and create inflationary pressure. He also emphasised that debt sustainability should be assessed not only through the debt-to-GDP ratio but also through repayment capacity, foreign-exchange availability and the productive use of borrowed resources.
He reiterated that opportunities to regularise undisclosed money undermine tax justice and create moral hazard. He further stressed that investment incentives will have limited impact unless the government addresses energy shortages, financing constraints, regulatory inefficiencies, political uncertainty and weaknesses in the law-and-order situation.
Mr Tamim Ahmed, Senior Research Associate at CPD, addressed the questions relating to investment and employment. He noted that the economy is simultaneously experiencing job losses and inadequate creation of new employment because of weak domestic and foreign investment. Although the budget contains initiatives for youth, SMEs and entrepreneurs, their impact will depend on effective implementation, improved business confidence and stronger utilisation of development allocations.
The briefing was broadcast live on Channel i and streamed through CPD’s Social platform.
