JS passes Tk9.38 lakh crore FY27 budget amid high hopes, tough challenges

Parliament today (30 June) passed the Tk9.38 lakh crore national budget for FY27, approving the BNP government's first full-year spending plan despite lingering concerns over inflation, revenue mobilisation and implementation. The new fiscal plan takes effect today with the beginning of the new fiscal year.

The budget received final approval after the House passed the Appropriation Bill, 2026. Finance Minister Amir Khosru Mahmud Chowdhury had unveiled the budget proposal on 11 June under the theme, "Journey Towards a Democratic, Humane and Inclusive Economy."

The FY27 budget is around 19% larger than the revised budget for FY26 and is equivalent to 13.73% of the country's gross domestic product (GDP).

Development expenditure has been set at Tk3,16,075 crore, a 47% increase from the revised allocation for the outgoing fiscal year. Of this, Tk3 lakh crore has been earmarked for the Annual Development Programme (ADP).

Development spending now accounts for 33.7% of the total budget, up from 27.27% in the previous fiscal year.

Operating expenditure has been reduced to 66.3% of the total budget, amounting to Tk6,05,740 crore. The government has allocated Tk1,27,000 crore for domestic and foreign debt servicing and Tk89,380 crore for salaries, allowances and pensions of public sector employees.

The government has set a revenue collection target of Tk6,95,000 crore, an 18% increase from the revised estimate for FY26. Of the total, the National Board of Revenue (NBR) has been tasked with collecting Tk6,04,000 crore.

Value-added tax (VAT) will remain the single largest source of tax revenue, with a collection target of Tk2,28,915 crore. Income tax and taxes on profits are expected to generate Tk2,19,835 crore.

The budget projects an overall deficit of Tk2,43,000 crore, equivalent to 3.6% of GDP. To finance the shortfall, the government plans to borrow Tk1,27,000 crore from domestic sources and Tk1,16,000 crore from external sources. Of the domestic borrowing, Tk1,12,000 crore is expected to come from the banking sector.

The government has set macroeconomic targets of 6.5% GDP growth and reducing inflation to 7.5% in FY27. However, provisional estimates by the Bangladesh Bureau of Statistics (BBS) indicate that GDP growth may slow to 4.14% in the outgoing fiscal year, while point-to-point inflation stood at 9.42% in May.

On Monday, Parliament passed the Finance Bill, 2026, incorporating 64 amendments. Among the key changes, the tax-free income threshold for individual taxpayers was raised from Tk3,75,000 to Tk4,00,000.

The House also fixed a 5% tax rate on the income of private universities, medical, dental and engineering colleges, as well as information technology-based private colleges. VAT on digital advertisements was reduced from 15% to 5%.

However, the government withdrew its proposal to make Taxpayer Identification Number (TIN) certificates mandatory for opening bank accounts, property mutation and registration of inheritance deeds. 

It also scrapped a proposed provision that would have allowed taxpayers to declare the actual value of flats and plots in income tax returns without question.

Speaking in Parliament on Monday, Finance Minister Amir Khosru Mahmud Chowdhury said presenting a budget was not an achievement in itself, adding that the real challenge lay in its effective implementation.

Challenges wait ahead

Economists and policy analysts have questioned whether the budget's key macroeconomic objectives are internally consistent, arguing that its expansionary fiscal stance could undermine efforts to reduce inflation and stimulate private investment.

While the government aims to bring inflation down to 7.5%, the budget increases total expenditure by 19%, raises development spending by 47%, introduces the ninth pay scale for public employees and expands social protection programmes. Analysts warn that the resulting boost in demand could sustain price pressures unless matched by a significant increase in production.

The budget's ambitious revenue target of Tk6.95 lakh crore has also drawn scepticism. In the first 10 months of FY26, the National Board of Revenue (NBR) collected Tk3.27 lakh crore, leaving a Tk1.04 lakh crore shortfall against its July-April target. To meet the revised target, the NBR would need to collect Tk2.27 lakh crore in the final two months of the fiscal year.

Economists have also cautioned that the government's planned domestic borrowing to finance a Tk2.43 lakh crore deficit could crowd out private-sector credit, potentially constraining investment and job creation. 

They further point to longstanding weaknesses in project implementation, a narrow tax base and persistent business bottlenecks as key risks to achieving the budget's growth and employment targets.