Bangladesh’s economy currently navigates an unavoidable crisis as the government begins drafting the national budget for the next fiscal year.

High domestic inflation and a persistent dollar shortage, coupled with geopolitical instability in the Middle East, have weakened the country’s macroeconomic foundation.

Conflicts involving the US, Israel, and Iran have destabilised global oil markets and created uncertainty regarding remittance inflows.

Escalating tensions in vital maritime routes, such as the Strait of Hormuz, have increased fuel import costs, directly impacting the transport sector and industrial production.

Frequent power outages and rising production costs have stripped major export sectors, particularly Ready-Made Garments (RMG), of their international competitiveness.

Crafting a balanced budget under these adverse conditions represents a formidable challenge for the administration.

While the current budget size stands at approximately 8 trillion taka, the National Board of Revenue (NBR) faces a revenue shortfall of nearly 71,000 crore taka from the first eight months of the fiscal year.

Total deficits may exceed 1 trillion taka. Analysts fear that if the government attempts to bridge this gap by increasing tax rates or imposing new burdens on existing taxpayers, the move will backfire.

“Most businessmen have already reduced their production capacity due to shrinking profits,” noted the News Chief of Kaler Kantho in a recent analysis.

With inflation exceeding 9% and food inflation often crossing 10%, the public’s purchasing power has diminished significantly. Increasing indirect taxes like VAT would further raise the cost of living and potentially trigger social unrest.

High interest rates, currently ranging between 14% and 16% following IMF-mandated market-based reforms, have stagnated investment.

Entrepreneurs hesitate to take new loans for expansion as high production costs make debt sustainability difficult.

To revitalise the economy, experts suggest the budget should prioritise spending cuts over revenue hikes. Specifically, the government should suspend less important projects in the Annual Development Programme (ADP) while increasing allocations for social safety nets and agricultural subsidies.

Business leaders expect specific reforms, including a total overhaul of the Advance Tax (AT) and Advance Income Tax (AIT) systems on industrial raw materials.

These taxes currently trap significant working capital, leading to cash flow crises. Furthermore, a stable corporate tax structure—ideally with a 2.5% reduction for both listed and non-listed companies—could provide much-needed relief.

Digitalising the tax payment process remains essential to reducing harassment and the cost of doing business. Instead of sudden cuts to tax holidays, the government should phase them out gradually to allow investors time to adjust.

Expanding the tax net to include the millions of eligible citizens who currently remain outside the system, rather than squeezing existing taxpayers, remains the most viable path toward a self-reliant economy.