FY26 budget targets overly ambitious, experts tell AmCham dialogue

Economists and business leaders have said the targets for revenue, investment, inflation, and growth in the proposed FY2025-26 budget are "overly ambitious," given the country's current economic condition.

Speaking at a post-budget discussion hosted by the American Chamber of Commerce in Bangladesh (AmCham) on Tuesday (3 June) in the capital, experts expressed concern over the absence of meaningful reforms in the tax structure and inadequate allocations for human capital development.

The event, held at a city hotel, was chaired by AmCham President Syed Ershad Ahmed while Dr Anisuzzaman Chowdhury, special assistant to chief adviser, attended as chief guest. 

Other discussants included Dr Fahmida Khatun, executive director of the Centre for Policy Dialogue (CPD), and Dr Zahid Hussain, former lead economist at the World Bank's Dhaka office.

Chairman of Policy Exchange Bangladesh Dr M Masrur Reaz delivered the keynote presentation. He said the proposed budget lacks clear direction on structural reforms, employment generation, and investment. 

He described the fiscal targets as overly optimistic, especially given ongoing political uncertainty and the lingering impact of recent elections.

"Inflation has slightly eased, but the projected targets remain out of reach. Without significant growth in investment and job creation, revenue collection will fall short," he warned.

He also questioned the timing of the proposed dearness allowance for government employees, calling it well-intentioned but potentially premature.

Tax measures 

While acknowledging several business-friendly measures – such as reduced VAT on LNG imports, increased subsidies, lower advance tax on raw materials, and reduced land registration fees – Dr Reaz flagged concerns over increased VAT on yarn and higher turnover tax on loss-making businesses. 

He also noted the absence of targeted initiatives to promote rural women's employment.

AmCham President Syed Ershad Ahmed echoed these concerns, saying improvements to the tax framework alone would not attract foreign investment unless law and order are ensured. 

He pointed to inefficiencies in customs, where as many as 17 signatures are still required to clear goods, and called for urgent reform of the logistics sector.

Revenue, inflation targets

Dr Zahid cast doubt on the feasibility of the revenue targets, noting that the National Board of Revenue (NBR) has historically struggled to meet similar goals. He urged better enforcement and curbing of tax evasion instead of relying on unrealistic projections.

He also questioned the credibility of the inflation target, saying the measures proposed may help contain inflation but are unlikely to bring it down meaningfully.

Fahmida Khatun argued that the government is trying to do more than is possible with limited resources. "You cannot meet unlimited demands with limited means," she said, criticising stagnant allocations for education and healthcare, which she said are vital for long-term development.

Reform, public spending

Anisuzzaman Chowdhury, in his keynote remarks, acknowledged that Bangladesh has a poor track record in effective public spending. "Many past projects have suffered from flawed planning and execution," he said, adding that unexpected business costs remain a challenge across sectors.

He admitted that reform is inherently difficult, not just in Bangladesh but globally. "Reform creates winners and losers. While beneficiaries may support it, those who stand to lose tend to resist quickly and forcefully, as seen in recent protests," he said.

Anisuzzaman added that while reform efforts are underway, progress has been slow and complicated by the lack of a clear roadmap. However, initiatives such as the National Single Window are being implemented to improve the business environment.