Some good steps, but no holistic structural change: CPD

The budget framework that has been presented shows a slight reduction in the overall size of the budget. At the same time, there have been some cuts to the Annual Development Programme as well. 

The scale of the budget has been under discussion for a long time, and one of the key reasons for this is the ongoing economic crisis—high inflation, stagnant investment, employment challenges, and difficulties in revenue mobilisation. 

"Taking these factors into account, it appears to us that the interim government's finance adviser has proposed the budget accordingly," said the Centre for Policy Dialogue (CPD) in their immediate budget reaction. 

Dr Fahmida Khatun, the Executive Director of CPD, presented the reaction to the press on 2 June. 

The proposed national budget for FY2025-26 sets the revenue collection target at Tk5.64 lakh crore, which is equivalent to 8.9% of the country's GDP. From the trend observed in recent years, this is a significant increase in the target, the think tank noted. 

Compared to the current fiscal year, the budget has been reduced by 13.2%, with cuts applied to 14 out of 15 sectors. "What is particularly noteworthy and concerning is that allocations under the Annual Development Programme have been reduced in monetary terms for three critical sectors: education, health, and agriculture," Dr Fahmida Khatun said in the statement. 

"We find this deeply troubling, as we have consistently advocated for increased funding in education and health. Moreover, allocations for agriculture — especially given its centrality to food security — are of paramount importance." 

CPD also noted that within the tax structure, the tax-free income threshold has been raised from Tk350,000 to Tk375,000. "This is a positive step. However, considering inflation has remained above 9% for nearly three years, even reaching 10-11%, this increase doesn't represent a significant leap. Nevertheless, we welcome this measure."

Moreover, those who have been documented as July Warriors, their tax limit has been increased to Tk5,25,000, which we think is a commendable step. 

Revisions have been made to various tax slabs, revealing a concerning disparity. Those falling within the lower-middle income bracket will bear a disproportionately higher tax burden, while higher-income earners face significantly reduced rates. This creates an inequitable scenario. 

Furthermore, the imposition of a uniform minimum tax of Tk5,000 across all regions fails to account for regional disparities. Residents of Dhaka and other districts are treated uniformly, despite unequal access to public services across regions. CPD believes this warrants reconsideration. 

"From our side, we would like to say that certain good steps have been taken separately. However, an overall holistic structural change is not being observed. It seems that within the same framework, a little more has been done here, a little less there — adjustments have been made in this manner. The philosophy of the budget speaks of an egalitarian society, but the practical measures taken have not always been consistent with that objective," Dr Khatun further said.