Budget’26 raises concerns about private investment sustainability: Build

The national budget for FY2025–26, amounting to Tk7.9 trillion, has been presented as a contractionary one aimed at achieving realistic GDP growth and containing inflation at 8%. While it includes long-term projections through to 2030 and expresses optimism about future economic prospects, concerns have been raised about whether the budget can effectively support and sustain private investment—particularly during Bangladesh’s transition from LDC status.

In a press release, Build (Business Initiative Leading Development) has highlighted several critical issues in the budget that may undermine private sector confidence. These include falling agricultural growth (down from 3.30% to 1.79%), a declining investment-to-GDP ratio (29.38%), uncertainty regarding US reciprocal tariffs, and persistent non-tariff barriers from neighbouring countries.

Although the budget mentions ongoing initiatives like the Bangladesh Single Window (BSW) and One-Stop Services (OSS) from BIDA, Build notes that Investment Promotion Agencies (IPAs) have yet to build sufficient trust among investors. 

At the same time, industries continue to suffer due to erratic utility supply. Despite promises of no utility price hikes, the absence of guaranteed gas and electricity availability remains a key concern. Coupled with high interest rates, limited access to bank loans, and a deteriorating law and order situation, the overall investment climate is seen as discouraging.

One notable concern is the increase in advance tax for commercial importers from 5% to 7.5%, which is expected to hurt SME entrepreneurs who rely on these importers for raw materials. However, the proposed introduction of a Central Bonded Warehouse for SMEs is viewed as a potentially positive step—provided it is implemented promptly. Build also suggests reconsidering IFRS-based audit requirements for SMEs, which could be unnecessarily burdensome.

On the other hand, for e-commerce entrepreneurs, VAT has been increased from 5% to 15% on the commission which will be a serious blow, specially on budding SME women entrepreneurs, the press release read.

Furthermore, the VAT exemption threshold has been lowered from Tk50 lakh to Tk30 lakh, and the turnover tax ceiling from Tk3 crore to just Tk50 lakh, placing additional strain on small enterprises. Although a Tk100 crore start-up fund has been introduced, Build argues that it should be raised to at least Tk300 crore to support the country’s entrepreneurial future.

While we are trying to attract new investment, the Budget directives  are different. At para 113, in order to increase tax-GDP ratio, VAT on Plastic product manufacturing industries has been raised from 7.5% to 15%, VAT on the main raw materials for RMG and Textile such as cotton thread and  MMF  has been increased  which will impact negatively on the  industry sector. 

A good initiative has been introduced regarding future adjustment of Minimum Tax  applicable on Mobile phone, tobacco, beverage (under subsection six of section 163 of ITA 2023), but the provision for 38 heads (clause 163(2))still remains non-refundable will work as a burden to the private sector, Build said in its press release.