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Finance Adviser Dr Salehuddin Ahmed has said the recent VAT hike at the beginning of the year was due to the need for funding compensation for those severely injured during the Anti-Discrimination Student Movement.
“Where will I get this money from? VAT is the quickest way to generate funds, so I implemented it. However, I have also reduced several items,” the adviser said during a views-exchange meeting on “The Role of Remittances in Bangladesh’s Economy,” organised by the Bangladesh Secretariat Reporters Forum (BSRF) on Sunday.
He mentioned that several hundred crore taka had to be allocated, with Tk 35 lakh per injured individual. Besides, Tk 500 crore is required for 300 police vehicles that were set on fire during the protests.
The adviser emphasised that Bangladesh faces a significant resource gap, necessitating support from the International Monetary Fund (IMF), the World Bank and the Asian Development Bank (ADB). “We need to repay our loans, and Bangladesh has never defaulted. These institutions are assisting us in tackling economic challenges,” he stated.
Regarding the country’s economic condition, he said, “We are walking on a tightrope. I won’t claim that we are performing exceptionally well, but we are not in a worse position than other countries. We are striving for a welfare-oriented and equitable state, but achieving that goal remains for the political government.”
In response to a query, he acknowledged that securing funds from the IMF and the World Bank comes with conditions.
“We have never failed to meet these conditions. They suggested increasing VAT, but it remains a sensitive issue. A slight VAT hike affects not just expatriates but also importers and overall market prices,” he explained.
He also revealed that Bangladesh is set to receive $500 million from the ADB in December, another $500 million from the World Bank in June, and $2 billion from the IMF between March and June.
“These funds come with conditions, such as tax and VAT hikes. Increasing income tax requires parliamentary approval, but VAT can be raised through an SRO (Statutory Regulatory Order). The required amount is relatively small—only Tk 120 billion,” he added.
On remittances, he highlighted that trust in the banking system has improved, leading to more transactions through formal banking channels rather than informal methods like ‘hundi’.
“However, not all remittances come through banks. When money is sent via hundi, not all of it reaches Bangladesh—some remains abroad. Many people hoard dollars, and instead of sending the currency, they provide local currency notes. This impacts foreign exchange reserves,” he explained.
He said that now, both the current and financial accounts are positive, saying, “While I won’t claim full macroeconomic stability, we are in a relatively stable position.”
The session was conducted by BSRF General Secretary Masudul Haque and presided over by the organisation’s President Fasihuddin Mahtab.