Amid these challenges, exports have shown resilience. Export receipts during October-December 2024 increased by 5.1 percent compared to July-September 2024 and by 20.2 percent compared to October-December 2023. This is due to increased export receipts from readymade garments, jute and jute manufacturers, and fish and shrimps. Despite these gains, the readymade garment sector could face headwinds due to new US tariffs and shifting global demand, potentially impacting future export performance.
In a departure from previous expansionary budgets, the interim government plans to present a contractionary budget totalling Tk 7.90 lakh crore for FY2025-26, down from Tk 7.97 lakh crore in the current FY2024-25. This reduction reflects a strategic shift towards fiscal prudence in response to mounting economic pressures. The projected budget deficit is expected to be equivalent to about 4.6 percent of GDP. To finance this deficit, the government plans to rely on a combination of foreign borrowing, bank loans, and savings certificates. Over half of the deficit is expected to be covered by external sources. The government will have to be cautious in bank borrowing as it will increase its debt burden. Besides, funds should be available to the private sector whenever needed.
One of the challenges, as in the previous years, will be the financing of the budget from domestic sources as Bangladesh’s tax-to-GDP ratio remains one of the lowest globally, which is below 8 percent according to government data. This significantly constrains the government’s fiscal capacity. To address this, the National Board of Revenue (NBR) has set a revenue collection target of Tk 4.99 lakh crore for FY2025-26. The government plans to broaden the application of the standard 15 percent value-added tax (VAT) rate and reduce tax exemptions. The government aims to generate additional revenue through new tax measures and administrative improvements. However, for efficient and enhanced tax collection, the government must initiate several reforms. Key initiatives to enhance revenue mobilisation include the separation of tax policy and administration within the NBR to reduce conflicts of interest and improve efficiency. Automation of NBR and skilled human resources are other necessary measures. Without deep reform measures, tax evasion cannot be controlled. Therefore, sufficient resource allocation should be made to enhance the institutional capacity of the NBR.
