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The economy of Bangladesh has been doing well even throughout the COVID-19 period compared to many other nations and it performed well in terms of macroeconomic management. The country has revived from the Liberation War’s death and destruction in the last 50 years, much like the Phoenix emerged from its ashes. Initially written off as an ‘economic basket case,’ the nation is now seen as a rising economic star and development role model. With the exception of the pandemic-hit fiscal years of 2020–21, the nation’s consistent GDP growth of over 7% has received praise and acclaim from all over the world. A shocked world now sees Bangladesh as a representation of resiliency, optimism, and revival. Bangladesh’s annual budget prior to 2009 was less than one lakh crore. Despite all the criticism for being overly ambitious and having a significant fiscal deficit, the Sheikh Hasina government began releasing and implementing a larger national budget each year as soon as it came into office. Her administration gradually increased the size of the national budget from less than one lakh crore to more than a few lakh crores over the following years. The national economy prospered as a result of increased budgetary allocation in every sector and the execution of many development initiatives.

However, over the previous two years, COVID-19 had somewhat slowed the nation’s pace of economic expansion. The finance minister set a BDT 678,064 crore budget for the upcoming fiscal year with an eye on ensuring a robust post-pandemic recovery and protecting the economy from the effects of a turbulent global economy and inflation. There is no need to dispute the size of the budget given the country’s enhanced economic growth and goal of being an upper-middle income country by 2031 because it is the largest budget the nation has ever seen. The minister set a GDP growth target of 7.5%, which we believe is acceptable and doable, taking into account the effects of foreign volatility on the economy. Overall, the budget is growth-friendly since it will solidify the post-pandemic economic recovery and is also cost-effective because it aims to reduce inflationary pressure.


According to State Minister for Planning Shamsul Alam, the administration is carefully formulating the budget, avoiding an excessive increase in spending while taking in mind the ongoing global economic crisis brought on by the pandemic and the Russia-Ukraine war. Overall public spending is anticipated to be at 15.4% of GDP in the upcoming fiscal year, the lowest level in seven years. The state minister referred to the current financial crisis as a global economic issue that will cause a recession. But he added that the government is aware of the problem. Regarding the actions to be implemented, he stated that this time’s budget would not be overly ambitious because the government was putting the focus on actions that would help address current inflation concerns.
The budget planned a total of BDT 6.78 trillion in spending, BDT 4.36 trillion in revenue, and BDT 2.42 trillion in total deficit (including grants). The budget recognised the persistent inflationary pressure brought on by the erratic commodity market and the disrupted supply chain networks as a result of the conflict between the United States and Russia. There were considerable efforts to aid small businesses in the area as well as provide incentives for sectors that focus on exports. On the other hand, in order to provide some respite to the public, subsidies, the health sector, and employment were given priority. The realities of our macroeconomic fundamentals and the impossibility of haggling over the global market should be kept in mind, even though these prioritisations won’t satisfy everyone’s ideal degree of interest. The main aspects of Bangladesh’s anticipated costs and finances for the upcoming fiscal year are provided in the parts that follow, together with a brief discussion of the essential underlying mandates.
The total amount of public spending (BDT 6.78 trillion) is up 14.2% from the prior budget. Public services, education and technology, and transportation and communication continue to rank as the top three sectors, just as they did in the previous budget, according to a breakdown of expenditures by sector. However, compared to the amended budget for 2021–2022, the budgeted expenditures in these sectors rose by 21%, 14%, and 24%, respectively. The health sector currently receives 5.4% of overall spending, and the agriculture sector has been given 6.2%. These industries have received 20% and 14% higher funding than in the previous budget. The allotment has been increased by 13% in total to cover interest payments. On the other hand, Social Security and Welfare were given a modest 4.7% increase and 5.5% of the overall budget spending. Similar to this, the Energy and Power industry has also increased by 6.3%. The following lists all sectors’ current and previous financial allocations.




From a different angle, expenses can be split into two categories: operational expenses and development expenses. Operating expenses accounted for BDT 4.32 trillion, or 60.6% of overall spending, while Annual Development Programs received BDT 2.46 trillion, or 36.3%. (ADP). Compared to the updated ADP for FY 2021–2022, this allocation is 17.2% greater. Historically, ADP has been financed by both internal and foreign sources. Of the current budget, 56% is anticipated to come from internal sources, and 44% from outside ones. Project Aid is expected to provide BDT 930 billion of the external resources. Transportation and communication, energy and fuel, education, housing and community facilities, and health are the top five industries that will use the ADP.




in order to provide some relief to the poor and lower-income groups, social protection needs to have an enlarged coverage.
– Selim Raihan



The National Board of Revenue’s (NBR) tax revenue, local loans, international loans or grants, and other revenue streams will be used to pay for the entire BDT 6.78 trillion budget. For the 2022 fiscal year, the NBR is expected to generate tax revenue totalling BDT 3.7 trillion, or 54.6% of the entire budget. In comparison to the updated budget for the prior fiscal year, this represents an increase of 12.1%. Of the funding, 21.6% will come from domestic loans, a 17.7% rise from the previous year. Over BDT 95 billion, or nearly 24% more than the last revised budget, is borrowed from outside. VAT represents 38% of tax revenue from NBR, followed by income tax (33%), import duty (12%), and supplemental duty (16%). With grants excluded, the overall deficit (BDT 2.42 trillion) represents 5.4% of GDP, down from 6.2% in the previous budget. The banking industry will provide 72.7% of the BDT 1.46 trillion needed to cover the deficit from domestic sources.

However, the main concern guiding the budget is combating inflationary pressure. The national budget is intended to increase income collection in order to pay for rising governmental spending. The budget also takes into account the inflationary pressure brought on by increased oil prices, the taka’s decline against the dollar, supply chain disruptions around the world, the Russia-Ukraine situation, and rising inflation in trading partners. While developing the strategy for the upcoming fiscal year, inflation was predicted to reach 5.6%. May 2022 fuel prices are 65% higher than May 2021 prices, while urea fertiliser prices are up 114%, soybean oil prices are up 29%, wheat prices are up 85%, and sugar prices are up 13%. Sector-specific policies have also emerged as significant attempts to safeguard individuals and businesses against rising inflation.


We may need to forgo economic progress to some extent in order to guarantee stability and safeguard people from hardships.
– Monzur Hossain



The government will make an effort to stabilise the supply and reduce demand. It has established a special fund worth BDT 50 billion for salaries and wages for export-oriented firms in an effort to achieve the former. The impacted big industrial and service sector firms would receive an additional BDT 730 billion, while the Cottage, Micro, Small & Medium Enterprises (CMSMEs) will receive an additional BDT 400 billion in working capital loans. From BDT 276 billion to roughly BDT 552 billion, the export development fund has increased. A pre-shipment credit refinancing scheme of BDT 50 billion and provisions for subsidising interest beyond 2% are also included. To preserve a stable business environment, the source tax on manufacturers’ raw materials was reduced from 7% to 4%.
To encourage export diversification, export-oriented businesses have received a reduced corporate tax rate of 12% in a more sector-specific context. Right now, the Ready-Made Garments (RMG) industry benefits from this rate. For green factories, the tax is further reduced by an additional 2%. A reduced corporate tax rate of 15% has been extended to the textile industry until the fiscal year 2025–2026. As long as the income is transferred into the country through banking channels, oceangoing ships flying the Bangladeshi flag are totally immune from the current 10% tax until 2030.


A conditional corporate tax reduction of 2.5% was made available to local businesses, including publicly traded, non-listed, one-person businesses, associations of persons, and other taxable entities. This concession required that investments over BDT 1.2 million be made through bank transfers and that receipts and income be transacted through banks. The corporation tax rate has been decreased in the proposed budget from 22.5% for listed firms to 20%, from 27.5% to 30% for non-listed enterprises, and from 22.5% to 25% for one-person businesses.
Startups will also prefer the new planned budget since it will give them a better chance of survival because it allows them to carry over nine years’ worth of consecutive losses. The tax rate, which was already low at 0.6%, has been further reduced to 0.1%, thus enabling new business owners to experiment and discover their potential.
Additionally, a ten-year tax exemption has been announced for the production of agricultural equipment, dairy and dairy products, baby food, and processed fruits and vegetables. Small businesses owned by women with annual sales under BDT 7 million will continue to receive tax benefits. Businesses would only be required to demonstrate return filings or risk paying fines between BDT 5,000 and BDT 20,000.



The budget deficit in FY23 will be 62% greater than it was in the previous fiscal year. “That is inconsistent with the expectation of expenditure restraint.
– Zahid Hussain



Selim Raihan, executive director of the South Asian Network on Economic Modeling, a think tank, stated that “The budget should reflect reality.” The macro-economy has recently been negatively impacted by a number of fresh issues that the economy is currently confronting. The Bangladeshi currency exchange rate, foreign exchange reserves, and balance of payments are all under a lot of strain. Growth in remittances is sluggish.
The circumstances have forced the government to relinquish total control of the exchange rate and allow the market to determine the rate based on supply and demand. “The action will have a variety of effects, including increasing inflationary pressures. However, the economy will be able to recover from the crisis stronger if it can withstand the shocks” Prof. Raihan stated.

The exchange rate adjustment was desperately needed to boost the flow of remittances since migrant workers tend to send money home through unofficial channels when there is a significant difference between the official market rate and the kerb market rate. The economist predicted that the transfer of remittances through the official channel would increase when the gap was closed. Exporters will benefit from the local currency’s decline. However, it is necessary to provide them with additional supportive measures. The price of commodities has increased, which has caused an unanticipated large spike in imports. “There are already questions about whether excessive billing for imports is occurring. We must observe the measures the government or the budget adopt to solve the problem” Prof. Raihan remarked. Since inflation is a component of the global crisis and not only Bangladesh’s responsibility, Prof. Raihan believes it will take time to reduce it to a manageable level. “So, in order to provide some relief to the poor and lower-income groups, social protection needs to have an enlarged coverage.” According to him, the government may need to further reduce the import tariff on necessities.

To protect the poor and lower-income groups from the effects of inflation, the government will need to intervene in the market by increasing the supply of necessities, implementing direct cash transfers, and providing rations, according to Prof. MM Akash, chairman of the economics department at the University of Dhaka.
The current state of affairs justifies the government’s best efforts. However, it cannot achieve the objective alone by financial means. And the next step will require the employment of financial tools that the government has not primarily used thus far. However, if the monetary tools are used properly, the supply of liquidity will drop, investments may decline, and imports may decrease. It might potentially slow down economic growth in the future. Even the nation runs the risk of experiencing stagflation, which is characterised by both high inflation and economic stagnation.

According to Monzur Hossain research director of the Bangladesh Institute of Development Studies, “We may need to forgo economic progress to some extent in order to guarantee stability and safeguard people from hardships.” When it comes to implementing significant reforms, the administration does poorly. What is perhaps more concerning is that it postpones reforms until a catastrophe occurs or a circumstance arises that forces the government to take action. But the recent exchange rate volatility could teach us a valuable lesson about the price of procrastination. Longtime advocates of a slow taka depreciation include experts. But it wasn’t completed. Now that foreign reserves are being depleted, the government is forced to act as Sri Lanka-like conditions could arise in Bangladesh.

The primary problem facing the government is preserving macroeconomic stability. Additionally, the budget deficit needs to be kept to a minimum in order to curb domestic demand. However, according to Zahid Hussain, the budget deficit in FY23 will be 62% greater than it was in the previous fiscal year. “That is inconsistent with the expectation of expenditure restraint.” Due to the controlled price mechanism, the local prices of fertiliser and crude oil do not reflect their rise in the global markets. A change has been made in gas prices. The administration faces an overwhelming dilemma because any course it takes would result in trouble.
Cottage, micro, small, and medium-sized businesses, according to Rizwan Rahman, president of the Dhaka Chamber of Commerce and Industry, require special attention. Low corporation taxes and source taxes are also necessary for large enterprises to operate.

Global volatility has increased due to the Russia-Ukraine conflict, which poses a risk of derailing the recovery process. Bangladesh, a country that relies heavily on imports, has also been severely impacted by rising commodity prices, record-high freight costs, and supply interruptions. Accelerated import costs forced the government to abandon the managed floating exchange rate regime and put pressure on the foreign currency reserves.
Experts, academics and other policy-level stakeholders have all shared their viewpoints about the budget. How it will perform and where it will lead the nation – only time will let that unfold.


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