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Bangladesh's proposed FY2026-27 budget faces a 'near-impossible revenue challenge' that could force the government to choose between paying civil servants more and protecting the poor, the Citizens' Platform warned Monday.
The government has set a revenue target of Tk 6.95 lakh crore for FY27, implying a growth rate of at least 42 per cent over the revised FY26 target , CPD Additional Research Director Towfiqul Islam Khan said, presenting a keynote at a pre-budget dialogue at a hotel in Gulshan, organised by the Citizens' Platform for SDGs, Bangladesh.
"No historical benchmark supports this," he cautioned, noting that even the most optimistic compound annual growth rate from FY01 to FY19 stood at just 15.6 per cent, and would still result in a shortfall of Tk 1.3 trillion.
The National Board of Revenue (NBR) collected only Tk 2.89 trillion in the first nine months of FY26 against a revised target of Tk 5.03 trillion, implying revenue must grow by 96 per cent in the final quarter alone to meet the annual goal, a scenario CPD described as virtually impossible.
Towfiq said the proposed Ninth Pay Commission recommendations, which would raise minimum government salaries from Tk 8,250 to Tk 20,000 and maximum salaries from Tk 78,000 to Tk 160,000, would require an additional Tk 1.06 trillion beyond the government's current annual salary, allowance and pension bill of Tk 1.31 trillion.
While the government is reportedly considering implementing only 50 per cent of the recommended basic salary increase in FY27, at a cost of Tk 300 to 350 billion, Towfiq cautioned that once rolled out, the pay scale cannot be reversed, and will squeeze allocations for subsidies, development projects and electoral commitments.
A central theme of the presentation was what Citizens' Platform called "the tax expenditure paradox." Bangladesh's NBR tax-to-GDP ratio has fallen to 6.6 per cent in FY25, among the lowest in the world, while the country simultaneously forgoes roughly 6.9 per cent of GDP through tax exemptions, based on FY22 data.
"Bangladesh forgoes nearly as much as it collects," Towfiq said, noting that direct tax expenditure alone was 148 per cent of direct tax collection in FY21.
The IMF, in its April 2025 review, suggested that Bangladesh begin phasing out tax exemptions from FY27.
CPD recommended a calibrated approach, retaining exemptions for remittance income and standard salary deductions while phasing out concessions for power and energy firms, microcredit institutions, large garment conglomerates, and autonomous bodies.
Citizen's Platform also flagged concerns over news reports suggesting the government may reintroduce tax amnesty for undisclosed income in FY27, calling it a move that would "directly contradict" the rationalisation agenda and breach a political consensus reached by all parliamentary parties.
On the debt front, the IMF has downgraded Bangladesh to "moderate risk" of both external and overall debt distress. Debt service liability, interest plus principal repayments, accounted for 26 per cent of total expenditure in FY24, exceeding the entire Annual Development Programme outlay by 15 per cent.
Bangladesh's debt service-to-revenue ratio stood at 33.4 per cent in FY24, nearly double the 18 per cent threshold set by the IMF for countries with medium debt-carrying capacity.
Platform's field assessment, conducted across 18 districts between May 2 and 11, found that flagship welfare programmes, the Family Card, Farmers Card, mid-day meals and free school uniforms, were showing early implementation cracks.
Beneficiary selection remained unclear, grievance mechanisms were barely functional, and food quality complaints were surfacing in the school meals programme.
The Family Card scheme, which aims to reach 5.0 million beneficiaries at Tk 2,500 per month, is estimated to cost Tk 145 million. The Farmers Card targeting 4.25 million beneficiaries at Tk 2,500 annually would cost approximately Tk 10.62 billion.
Summing up the budget outlook, Towfiq framed the FY27 challenge as a collision between economic compulsion and political necessity. Revenue must grow 42 per cent, debt servicing is approaching a peak, and IMF conditionalities demand reform, while the government simultaneously faces pressure to raise salaries, expand subsidies and deliver on 51 manifesto commitments.
"Budget FY2026-27 faces dual pressures, balancing economic stability and reforms while meeting political demands to deliver quickly, all within the tightest fiscal space in recent memory," he said.
Towfiq also urged the government to make the Ninth Pay Commission report public, publish FY25 tax expenditure estimates, and bring transparency to ADP project documents, including feasibility studies and impact assessments. "History may ultimately remember this administration for its concluding budget, rather than its beginning."
Citizen's Platform for SDGs, Bangladesh, a network of civil society organisations, is working to advance the Sustainable Development Goals at the national level.
The event brought together policymakers, economists, development practitioners and civil society representatives ahead of the national budget expected to be placed before parliament next month.