Pharma, tech, EVs cheer FY27 budget as tobacco, steel count the cost

The proposed national budget for FY2026–27 has set the stage for a sweeping transformation of the country's capital market, with a clear pivot toward long-term structural reform and sector-driven growth.

Presented by Finance Minister Amir Khosru Mahmud Chowdhury, the Tk9.38 lakh crore budget signals a decisive move away from short-term retail incentives toward building a deeper, more institutionalised market. The result is a sharply differentiated landscape where policy support is concentrated on high-growth industries, while traditional sectors and retail investors face new pressures.

Pharmaceuticals lead sectoral gains

Pharmaceutical companies are among the biggest beneficiaries, gaining from a series of duty cuts and tax exemptions.

The government has reduced import duties on key raw materials used in the production of cancer drugs, Active Pharmaceutical Ingredients (APIs) and medical equipment, with some items receiving full exemptions until 2030.

These measures are expected to lower production costs and enhance export competitiveness for major listed firms such as Square Pharmaceuticals, Beximco Pharma, Renata and Beacon Pharma.

According to EBL Securities, the policy support will strengthen Bangladesh's position as a growing pharmaceutical exporter while encouraging domestic manufacturing of high-value medical products.

Tech and telecom sectors get digital boost

The technology and telecommunications sectors have also emerged as key winners, driven by policies aimed at accelerating digitalisation and local manufacturing.

The budget proposes a reduction in Advance Income Tax (AIT) on IT hardware from 5% to 2%, along with full duty exemptions on laptops, desktops and computer components until 2030, measures expected to significantly reduce costs for both consumers and businesses.

In the telecom sector, operators such as Grameenphone and Robi stand to benefit from the withdrawal of a 20% withholding tax on regulatory payments and the elimination of the Tk300 SIM card tax. These changes are expected to improve cash flow, lower customer acquisition costs and potentially revive growth in the mobile market, according to a research report by Sheltech Brokerage.

EV and energy sectors gain long-term incentives

In a forward-looking move, the government has extended strong policy support to the electric vehicle (EV) and renewable energy sectors.

EV manufacturers will enjoy steep duty concessions, with only 3% import duty on raw materials for high-value-added production and tax exemptions until 2031, complemented by duty-free imports of charging infrastructure and reduced vehicle registration costs.

According to Sheltech Brokerage, companies such as Runner and Walton are expected to benefit from these incentives, which aim to position Bangladesh as a regional hub for EV manufacturing.

The solar power sector has also received a significant boost, with tax exemptions extended until 2035 and duty waivers on key components. Analysts believe these measures will improve project viability and attract fresh investment into renewable energy. Key beneficiaries are expected to include Summit Power, Beximco, Confidence Cement and Paramount Textile.

Agriculture and consumer sectors see cost relief

The agriculture sector has received targeted support through duty exemptions on key feed ingredients and VAT relief on fertiliser trading. These measures are expected to lower production costs for companies such as Index Agro and Aman Feed, with potential downstream benefits for farmers and consumers.

Consumer-facing industries are also set to benefit from reduced input costs. Lower duties on raw materials used in household cleaning products and personal care items are expected to improve margins for manufacturers, with Kohinoor Chemical and Marico among the key players in the sector.

Tobacco, steel under pressure

Not all sectors have fared well under the new budget.

The tobacco industry faces one of the steepest tax hikes, with supplementary duties of up to 350% imposed on key raw materials and products. The increased burden is expected to significantly compress margins for companies such as BAT Bangladesh.

The steel sector, meanwhile, is grappling with higher input costs following an increase in duties on ferroalloys, likely impacting major players such as BSRM and GPH Ispat in the near term.

Shipping faces regulatory tightening

The shipping and port sectors face new challenges under stricter regulations. The government has reduced the maximum allowable age for imported ships from 25 years to 10 years, significantly raising capital expenditure requirements. The mandatory holding period before selling vessels has also been extended from three to five years, limiting operational flexibility for firms such as Bangladesh Shipping Corporation and MJL Bangladesh.

Financial sector sees mixed impact

The financial services sector presents a mixed picture. Banks, non-bank financial institutions and insurance companies will benefit from tax exemptions on stock dividends, which are expected to support capital strengthening. However, the introduction of mandatory Tax Identification Number (TIN) requirements for opening most bank accounts may slow account growth, particularly in rural areas.

Policy shift reshapes market dynamics

At the heart of the budget is a structural overhaul aimed at transitioning Bangladesh from a debt-led to an investment-driven economy. The government has prioritised capital market development through reforms in taxation, listing procedures and financial instruments.

A key highlight is the shift in Tax Deducted at Source (TDS) from a "minimum tax" to an "advance tax" system, a move widely welcomed by market intermediaries.

According to a budget research paper by BRAC EPL Stock Brokerage, this shift effectively ends a persistent liquidity trap where non-refundable final tax settlements previously depleted operating capital regardless of a company's actual profitability. By making the tax adjustable and refundable, the government has addressed a decade-old grievance, potentially boosting the operational capacity of brokers, asset management companies and the stock exchanges.

Retail investors feeling the squeeze

Perhaps the most controversial aspect of the budget is its impact on individual retail investors. The government proposes reducing the tax rebate rate from 15% to 10% and lowering the maximum investment ceiling for rebates from Tk10 lakh to Tk7.50 lakh.

Zuhaier Shams, a senior research executive at Sheltech Brokerage, warned that these measures could discourage middle-class participation in the market.

Rehan Kabir of EBL Securities noted that the stock market remains a viable investment avenue, given the absence of the rigid restrictions found in savings certificates. However, the psychological impact of a reduced rebate may weigh on retail sentiment. The withdrawal of the 20% flat tax on dividend income in favour of standard corporate tax rates is also likely to affect the bottom line of market intermediaries.