Proposed budget in line with estimates, but below expectations: CPD's Mustafizur

Highlights:

• Proposed budget for FY2025-26 fell short of expectations, CPD says
• The budget aligns with macroeconomic estimates
• The budget failed to incorporate reform proposals by several commissions

The proposed budget for FY2025-26 falls short of expectations despite aligning with macroeconomic estimates, said the Centre for Policy Dialogue's (CPD) Fellow Prof Mustafizur Rahman.

"The budget did not reflect the recommendations of various reform commissions. The budget is in line with the estimates, but disappointing with expectations," he said during a press conference held in the capital today (3 June).

During the press conference, the think tank presented its analysis of the Tk7.90 lakh crore budget proposal unveiled by the finance adviser yesterday (2 June).

According to the CPD analysis, the budget fails to incorporate several recommendations made by the Local Government Reform Commission (LGRC), including the establishment of an Innovation Lab, enhancement of digital public services, and improvements in capacity building and training.

Additionally, the Labour Reform Commission (LRC) had identified two budgetary and 78 fiscal measures. While some were long-term goals, others could have been reflected in the FY26 budget.

For example, one recommendation was to link tax incentives to labour rights compliance. Apart from existing waivers for employing third-gender and specially-abled workers, no such measure has been included.

The budget also does not substantially strengthen agencies monitoring labour rights.

Although allocations for Department of Inspection for Factories and Establishments, Department of Labour and Minimum Wage Board have increased, the rise is not significant in real terms, CPD noted.

Mustafizur Rahman further said, "Revenue collection has been set at 8.9% growth. However, this has been based on the last budget, not on actual collection. As a result, actual collection will have to increase by 17–18% to achieve the target."

The proposed revenue growth (8.9%) is higher than public expenditure growth (6.2%). Total expenditure is projected at 12.7% of GDP, down from 13.4% in the revised FY25 budget, while revenue is expected to be 9.0% of GDP, lower than the previous 9.3%.

"The target should increase as countries like India and Bhutan earn more revenue. The revenue collection system should be digitalised." said Mustafizur Rahman.

"However, this target cannot be achieved," Mustafizur added.

Commenting on VAT exemptions, Mustafizur Rahman said, "LNG is imported by the government and private sectors. The government does not impose VAT on itself. That is why the private sector demanded a reduction in VAT."

CPD, however, expressed concern over increased reliance on fossil fuels.

The VAT exemption for LNG imports and a rise in LNG subsidies—from Tk6,000 crore in FY25 to Tk9,000 crore in FY26—may hinder domestic gas exploration and slow renewable energy adoption, the organisation said.

On remittance, Mustafizur Rahman noted that a key reason behind higher official inflows is a decline in money laundering through hundi. Remittance growth is projected at 8.0% in FY26, compared to 20.0% in FY25, with July–May FY25 growth recorded at 28.7%.

The CPD analysis was led by Executive Director Fahmida Khatun, with contributions from Professor Mustafizur Rahman, Khondaker Golam Moazzem, and other senior researchers.