Metropolitan Chamber of Commerce and Industry (MCCI) has termed the proposed budget as challenging, particularly in achieving the revenue target of Tk5.64 trillion.

In a statement issued on Tuesday, MCCI expressed deep concern about the current investment climate, noting that investment has dropped to 10-year low, with both public and private investments in decline.

“A weakening investment environment, exacerbated by factors such as bureaucratic complexities and inadequate infrastructure, has intensified the economic crisis,” read the statement, signed by Hasan Mahmood, chairman of the tariff and taxation committee at MCCI.

MCCI strongly urges a resolution to increase the tax burden on regular taxpayers by raising tax rates and broadening the tax net is crucial to resolving this matter effectively.  “Owing to the IMF loan conditions; there is a risk of placing an additional tax burden on existing taxpayers to improve the tax-GDP ratio. Therefore, MCCI advises the government to ensure proper financial management by limiting expenditures in public sector projects,” the statement added.

The budget for the fiscal year 2025–2026 has projected a deficit of Tk2.26 trillion, of which Tk1.01 trillion is expected to come from external financing and Tk1.25 trillion from domestic sources.

Due to the ongoing tax reforms recommended by the International Monetary Fund (IMF), the final budget deficit could increase. The government has set a borrowing target of Tk1.04 trillion from the banking system, which is 5.05 percent higher than the revised budget for fiscal year 2024–2025.

This increased borrowing from the banking sector poses significant risks, including a potential ‘crowding out’ effect that could reduce the availability of funds for private sector investors, according to MCCI.

The statement further noted that borrowing from the central bank could increase inflationary pressure, thereby affecting consumers.

MCCI stressed the need for a proper balance between these two financing options. Additionally, it called for a provision to restructure the banking sector to ensure strategic financial management. The signature trade body expresses its disappointment over the proposal to increase the turnover tax from 0.60 to 1 percent and maximum 3 percent, depending on the sectors, in the current budget, especially since no initiative has been taken to reduce the effective corporate tax rate.

Finance Adviser Salehuddin Ahmed announced the proposed nation budget on Monday. The total size of the proposed national budget for the fiscal year 2025–26 is Tk7.9 trillion. This is slightly smaller – by around 0.9 percent – than last year’s budget, marking the first time in Bangladesh’s history that the national budget has shrunk.

The government has set a GDP growth target of 5.5 percent for the year ahead, while aiming to bring down inflation to below 8 percent. The revenue collection target stands at Tk5.64 trillion, which is roughly 9 percent of the country’s GDP. To bridge the gap between spending and earnings, the budget anticipates a deficit of Tk2.26 trillion, or 4 percent of GDP.