Budget to focus on economic stabilisation through reforms, wider tax net: Finmin

Finance Minister Amir Khosru Mahmud Chowdhury today (21 May) said the government is prioritising economic stabilisation through structural reforms, expansion of the tax net and restructuring of the financial sector.

Speaking at a roundtable titled "Budget in crisis moment and public demand" at Capital Hotel in the capital, the minister said the government inherited an economy weighed down by structural weaknesses, underperforming industries and stress in the banking sector, while recent global geopolitical tensions have added further pressure.

"We are passing through a challenging period, but this is also an opportunity to bring long-needed reforms," he said.

The finance minister said many industries in Bangladesh remain undercapitalised due to prolonged weaknesses in the banking sector and currency depreciation, which eroded companies' working capital and constrained business expansion, employment generation and fresh investment.

He said the government is trying to address these challenges despite limited fiscal capacity and rising external financing pressure amid the Middle East conflict and higher global interest rates.

According to the minister, the global public financing architecture has changed significantly in recent years, narrowing the gap between concessional and market-based financing as borrowing costs continue to rise worldwide.

"As financing costs are increasing globally, Bangladesh now needs financing innovation and a new financing architecture," he said, adding that such reforms are essential to achieve the government's long-term target of building a trillion-dollar economy by 2034.

Highlighting Bangladesh's heavy dependence on the ready-made garment sector, he stressed the need for export diversification and said the government is pursuing deregulation and business-friendly reforms to attract both local and foreign investment.

The minister also underscored the importance of developing the capital market to reduce excessive dependence on bank financing for large-scale investments. He said the government is working with global investment banks and international fund managers, some of whom have expressed interest in launching Bangladesh-focused funds from financial hubs such as Hong Kong and London.

On revenue mobilisation, the finance minister said the government is not focusing on increasing tax rates despite Bangladesh having one of the lowest tax-to-GDP ratios in South Asia. Instead, it plans to widen the tax net, simplify tax compliance and introduce technology-driven tax administration.

"We are trying to bring more people into the tax system through deregulation and ease-of-doing-business reforms," he said, expressing hope that Bangladesh could gradually raise its tax-to-GDP ratio to 9% if the National Board of Revenue performs effectively.

The minister also expressed concern over weaknesses in the country's financial reporting ecosystem, saying poor accounting standards and lack of transparency have made it difficult for banks, investors and stock market participants to assess the actual condition of businesses and financial institutions.

"The financial reporting ecosystem has weakened significantly, creating another major challenge for the economy," he said.

He called for coordinated efforts among the government, businesses and financial institutions to implement reforms and restore confidence in the economy.