Bangladesh may lose Tk1,327 crore in revenue due to US trade deal: CPD

Bangladesh could lose around Tk1,327 crore in customs revenue in the current fiscal year due to a recent trade agreement with the United States, according to the Centre for Policy Dialogue (CPD). 

Speaking at a media briefing titled "CPD Recommendations for the National Budget 2026-27" in Dhaka today (10 March) Fahmida Khatun, executive director of the think tank said the government should reassess the implications of the agreement for both revenue earnings and public spending, and if necessary, reopen discussions with the US.

Fahmida Khatun said Bangladesh has signed an "Agreement on Reciprocal Trade" with the United States, under which the country will provide duty-free access to about 4,500 products imported from the US. In addition, tariffs on another 2,210 products will be gradually reduced over the next five to 10 years.

"As a result, the government is expected to lose around Tk1,327 crore in customs revenue in the current fiscal year alone," she said.

According to CPD, the agreement effectively grants the US unilateral duty-free market access, which may conflict with the rules of the World Trade Organization (WTO). Because of WTO obligations, Bangladesh could face pressure to extend similar tariff concessions to other member countries, potentially creating broader fiscal risks in the future.

Khatun also noted that the agreement includes provisions requiring Bangladesh to purchase certain products from the United States, which could further increase government expenditure.

"In this context, the government should reassess the implications of the agreement for both revenue earnings and public spending, and if necessary, reopen discussions with the US," she added. 

Speaking at the event, CPD distinguished fellow Mustafizur Rahman said global trade is increasingly being used as a geopolitical tool, weakening the multilateral trading system.

He suggested that the full details of the agreement should be made public, as it contains several financial and policy implications. Since a large part of the implementation will involve the private sector, the government may need to provide subsidies to encourage businesses to import products from the US, he added. 

Mustafizur Rahman also warned that some provisions could raise concerns about policy flexibility and economic sovereignty, particularly regarding sourcing decisions and trade relations with third countries.

Revenue shortfall challenge

At the briefing, CPD also highlighted growing challenges in revenue mobilisation.

Khatun said revenue growth stood at only 12.9% until January of the current fiscal year, far below the 34.5% target. To achieve the annual target, revenue collection would need to grow by 59.4% in the remaining months, which she described as unrealistic.

She noted that the revenue shortfall has already reached around Tk60,000 crore.

Due to weak revenue collection, the government's reliance on bank borrowing has increased significantly. Until December, the government borrowed Tk59,655 crore from the banking sector, while non-bank borrowing and foreign assistance declined.

"Excessive borrowing from banks is creating risks in the financial sector and crowding out private sector credit," she said.

The CPD also pointed out that inflation has remained above 8%, while ongoing conflicts in the Middle East could create further pressure through higher energy prices, as Bangladesh relies heavily on fuel imports from the region.

In addition, implementation of the Annual Development Programme (ADP) has slowed sharply, with only 20.3% of projects executed by January, the lowest rate in the past 15 years.

Export earnings also declined by 3.2% during the current fiscal year, while imports increased by 3.9% during the same period.

Given these economic realities, Khatun advised the government to avoid overly ambitious targets in the next budget and focus on realistic revenue projections, stronger fiscal management, and reforms to improve the country's tax-to-GDP ratio, which currently stands at about 6.8%.

She also stressed the need to reduce unnecessary public expenditure and revive investment, noting that declining investment has also reduced employment opportunities in the economy.