A budget for the people, one future governments should follow: Finance Advisor Salehuddin

Bangladesh’s interim government, led by Muhammad Yunus, is set to unveil its first national budget on Monday, nearly 11 months after taking charge in the wake of the July Uprising that toppled Sheikh Hasina’s Awami League.

Ahead of delivering the 2025–26 fiscal year budget, Finance Advisor Salehuddin Ahmed told bdnews24.com that the new budget will be smaller in size than the previous year’s but shaped by “realism,” electoral considerations, and the government’s reform agenda.

However, he assured there would be no sweeping changes.

“This is a budget based on pragmatism,” said the advisor. “It’s business-friendly and designed to simplify the tax system.”

A Dhaka University economics graduate, Salehuddin earned his PhD from McMaster University in Canada and previously served as governor of Bangladesh Bank.

Speaking from both academic insight and practical experience, the interim finance minister said this year’s budget would focus on boosting domestic revenue mobilisation.

Key measures include a reduction in corporate tax rates, rationalisation of tax exemptions, and cuts to “unnecessary” expenditure. The VAT structure will also be adjusted.

Efforts will be made to contain the budget deficit to within 4 percent of GDP, he said, adding that foreign assistance would be essential to financing the gap.

“This isn’t to say the situation is ideal,” Salehuddin remarked. “But it’s not so dire that Bangladesh is in the ICU. If this government hadn’t stepped in, the economy would have suffered serious damage.”

The advisor acknowledged that the budget was being presented amid ongoing political unrest. Still, he said, special attention has been given to easing pressure on low-income groups.

Key social safety net programmes--including allowances for the elderly, widows, the disabled, and other vulnerable groups--will continue, with modest increases in both payout amounts and the number of beneficiaries.

In a notable move, the budget will also include a dedicated allocation for the rehabilitation of individuals affected by or involved in the July Uprising.

“This is a different situation,” Salehuddin said. “We are presenting a people-centred budget that future governments can build upon.”

“BUDGET SPEECH TO BE BRIEF BUT COMPREHENSIVE”

Advisor Salehuddin said this year’s budget speech will be relatively brief, around 130 to 140 pages, but will include all necessary details.

“Though the speech is shorter, it will cover everything comprehensively,” he told bdnews24.com. “After presenting the budget, we will allow two to three weeks for public and stakeholder discussions.”

President Mohammed Shahabuddin is scheduled to sign the Budget Ordinance on Jun 30, which will serve as the formal approval.

However, several components, especially those related to tariffs and taxation, will come into effect from Monday, Jun 2, while the rest of the allocations will be activated from Jul 1.

“IT’S A REALISTIC, BUDGET -- NOT MEANT TO PLEASE OR PROVOKE”

“We’ve tried to make this budget as realistic and impartial as possible, without aiming to either please or criticise anyone,” interim finance minister Salehuddin said.

“Budgets aren’t about dramatic changes that can be implemented in a single year. Reforms must be phased in gradually. This year’s budget reflects that realism, it’s designed to be both logical and simple.”

Asked whether the budget contains any "good news" for ordinary citizens, the finance advisor replied: “It’s not about good or bad news, it depends on one’s perspective. We’ve focused on creating a business-friendly budget. That doesn’t mean everyone will benefit equally. We’ve placed special emphasis on sectors and groups that have historically received less support.”

He added that measures have been included to ease the burden on low-income consumers. “For years, we’ve tried to ensure that the burden of direct and indirect taxes remains tolerable. This budget continues in that spirit.”

Key changes include simplification of the VAT structure. “Rates like 1 percent, 1.5 percent, 2.5 percent, and 3 percent often create confusion in implementation and accounting. We aim to consolidate these into fixed, manageable rates.”

For individual taxpayers, there will be some relief in income tax. The corporate tax gap between listed and non-listed companies will be widened to encourage more firms to enter the capital market. Taxes on brokerage firms will be slightly reduced.

“In terms of consumption taxes,” he added, “we’ve tried to offer some relief for low-income consumers through targeted exemptions or support. Conversely, those with higher tax-paying capacity will see fewer concessions.”

To improve the ease of doing business, the government plans to streamline some regulatory procedures. For example, under the new proposal, trade licences may be renewed before the current two-year period ends, without initially requiring an audit report, though the report must be submitted later.

The government is also considering allowing VAT returns to be filed quarterly or semi-annually, rather than monthly, to reduce administrative burden on businesses.

Tax holidays are being phased out, Salehuddin said, with only essential and well-justified exemptions to remain. “The entire budget is grounded in realism,” he reiterated.

BUDGET SIZE TO SHRINK SLIGHTLY

The 2025–26 national budget will be slightly smaller than the previous year’s and more aligned with the revised budget, reflecting the country’s current fiscal constraints, the finance advisor said.

He noted that for the first four months of the current financial year, September to December, economic activity had virtually stalled, resulting in minimal revenue generation.

While business conditions have improved since January, the tax-to-GDP ratio stood at only 7.5 percent during the July-December period, making any rapid increase in revenue collection unlikely.

Given this context, the upcoming budget will place a greater emphasis on mobilising domestic resources, although foreign loans will still be required for development projects.

MEGA PROJECTS TO BE SCALED BACK

A key focus will be on gradually raising the tax-to-GDP ratio, with even a 1 percent improvement considered a positive outcome.

The Annual Development Programme (ADP) will be drafted with a more rational approach.

Unlike previous years, when mega projects of $8-10 billion were common, the government now considers $2-3 billion undertakings, such as the metro rail, to be the upper threshold. While ongoing projects will continue, the initiation of new mega ventures will be limited.

Social safety net programmes, including allowances for the elderly, widows, people with disabilities, and the destitute, will remain in place, with a modest increase in both the amount disbursed and the number of beneficiaries.

Significant allocations will also be made for the rehabilitation of those affected by or involved in the July Uprising. Some funding has already been approved, but officials are reassessing the strategy, as many individuals may not be able to return to rural areas.

Fuel prices will remain unchanged, according to the advisor. Instead, efforts will be made to reduce expenditure in high-subsidy sectors, particularly energy and electricity.

Agricultural subsidies will remain intact, especially those covering fertilisers, pesticides, and diesel for irrigation, as the sector is performing relatively well.

Education and health allocations may see slight reductions, but only through improved efficiency and oversight. In the past, inflated cost estimates, sometimes by Tk 5-6 billion, were discovered in several projects, often to benefit contractors. This time, all allocations are undergoing a second round of scrutiny.

The budget, Salehuddin said, is being designed to be both business-friendly and tax-system friendly, with a strong emphasis on transparency and fiscal discipline.

bdnews24.com: Will the tax-free income limit be increased this time?

Salehuddin: Yes, it will have to be increased a little, but not by much. About 1.8 million returns have been filed this year, two-thirds of them with zero tax. Think about it. Income above Tk 350,000 is taxable; but in reality, most of them show zero tax.

Many who are supposed to pay taxes evade it and face no consequences. People with a monthly income of Tk 30,000-40,000 also turn up with zero tax. However, nothing can be prevented instantly. We will introduce minimum tax for those who deliberately evade taxes. That is, if you submit a return, you must pay a minimum tax -- we have come to this decision.

bdnews24.com: This year will also see a budget deficit? How will you balance income with expenditure?

Salehuddin: First of all, our main goal is to generate internal resources. And for this, first of all, we are taking initiatives to reduce tax expenditure. Reducing tax expenditure means limiting various exemptions. This will increase the collectable revenue.

Another big issue is reducing tax evasion. We will completely digitise the income tax of individuals from next year.

We want to reduce the corporate tax rate of businessmen, so that the total tax collection increases. We think that the policy interest rate is relatively high now, but we cannot lower it completely. Because this may increase inflation. We want to encourage business and trade a little, because the main revenue comes from corporate income rather than individual income.

Many retail traders collect VAT but do not deposit it in the government treasury, this will be stopped.

We will cover a part of the budget deficit through foreign aid. However, we will not let the budget deficit exceed 5 percent—we will try to keep it within 4 percent. We are also focussed on cutting expenses. We have already reduced needless expenses like buying a car, traveling abroad.

We are not going to build new ones unnecessarily. For example, big hospitals are being built, but without doctors and equipment. In those cases, they cannot be started. So we are saying - utilise those who are already there. If necessary, appoint doctors, bring equipment.

Our priority is healthcare and primary education. The number of schools and madrasas under MPO has increased a lot - a large amount of money is spent on these. Recently, primary teachers have demanded a salary increase. We have agreed to some extent, it is a huge amount. On the other hand, madrasa teachers and technical teachers have various allowances - they will remain.

Many are saying that the growth has been the lowest (3.97 percent) this fiscal year. We did say that the information was until December. We still have information from January to June -- and that is when business is dynamic. We hope that the growth will be 4.5 percent. Information, data and statistics will not be manipulated in any way. Per capita income has risen -- we are not bragging about it. It has increased because the value of the rupee depreciated, while the price of the dollar rose.

We are not saying that the situation is excellent. But neither is it that bad... If this government had not taken responsibility, the economy of Bangladesh would have been “seriously damaged”.

We have received $2.3 billion in talks with the IMF, while the World Bank provided great assistance. Many say, why are we taking foreign loans? We say—we might not have been able to do without foreign loans—we have not crossed the debt limit yet and those who understand know—this is a very important issue.

bdnews24.com: What does the budget hold for the capital market?

Salehuddin: The problems in the capital market run deep. It’s been the same for 15 years, regardless of who holds the position of chairman or president. Shares in the Z category are being protected using artificial “floor prices”. That is not right.

Recently, ICB disbursed Tk 30 billion through Sukuk bonds (Islamic or Shariah-complaint bonds)--this, too, is questionable. Insider trading is rampant. Some manipulate prices, then exit after making profits.

Even non-functioning companies are posting gains in the market. Some companies virtually do not exist, yet their share prices keep rising.

We are seeing fines being imposed--well-known individuals are being penalised--but they’re not paying up, even though these are legitimate dues.

A certain cricketer was fined, and more cases are on the way against him.

To stop the freefall in the capital market, we now aim to introduce some fresh Initial Public Offerings (IPOs).

We’re considering offloading shares of major firms, including state-owned enterprises, Unilever, and PGCL.

We are also in talks with new players, encouraging them to enter the market.

bdnews24.com: Will the budget include any support for those affected by the July Uprising?

Salehuddin: We’re already providing three types of assistance. One is for those who lost their lives, another for those who were permanently disabled, and the third covers medical treatment.

In addition, one member from each family of the deceased or injured will be given employment. This has already been implemented.

On the matter of rehabilitation, we’ve said that this is usually handled by two ministries-- Liberation War affairs ministry and the social welfare ministry.

We’ve now decided that the Liberation War affairs ministry will take the lead, though the social welfare ministry will also play a part.

This year’s budget will include a separate allocation for this sector. A full rehabilitation plan will follow in future phases.

bdnews24.com: What positive developments can we expect in this year’s budget regarding the power and energy sector?

Salehuddin: A few steps have been taken concerning power and energy. One is that BAPEX has been allocated a special fund. Another major focus is on reducing our system loss, which is a huge task. It increases the cost of production.

We’re also reviewing the agreements we have with independent power producers (IPPs). But these contracts can’t be revised instantly. Take the Rampal project, there’s an international agreement in place, so it’s not easy to issue anything quickly.

The biggest problem is that we haven’t properly explored or maintained our gas fields. We haven’t done any offshore work either. Even Myanmar is drilling offshore now. India has made much more progress. We were allocated offshore blocks through the UN long ago, but no effective action has been taken.

We recently asked for tenders, but due to a poor response, it had to be reissued. The reason is simple: this requires significant investment. One gas well alone can cost Tk 2-3 billion, and there’s still no guarantee of finding gas. Drilling ten gas wells might cost over a billion dollars. If gas is discovered in just one of them, the returns could be several billion. If not, it’s a loss. These initiatives are meant for large companies.

I’ve spoken with the US Department of Energy, and they’ve said there are seven companies who are interested.

bdnews24.com: The issue of black money comes up with every budget. What’s the directive this time?

Salehuddin: The blanket opportunities that previously existed for legalising black money will not continue anymore. A lot of black money is earned through land sales because the official valuation is so unrealistic.

Take Gulshan, for example. Officially, 0.1 hectare of land is valued at Tk 1.5 million, but in reality, it’s sold for Tk 10 million or even Tk 5 million. Someone might buy a house listed at Tk 6 million, but they’ve actually paid 30 or 40 million. This creates a situation where neither buyer nor seller can show the actual transaction. People buy land and leave it unregistered to avoid paying Tk 2.5-3 million in fees.

We’re trying to find a solution. If we lower the tax rate and increase the official land valuation, actual tax revenue will remain consistent. That way, genuine buyers will be more willing to register their land.

I’ve formed a committee comprising the land secretary, the cantonment board, and the defence secretary. They will reassess the official land values.

By law, land prices in Bangladesh are meant to be revised every two years, but that hasn’t been happening. In many areas, things are complicated. Take a village marketplace, for example, it cannot be valued at the same amount as ordinary farmland.

If the value is set based on the marketplace’s value, farmers will suffer when registering. But if marketplace land is valued based on the value of farmland, the government loses revenue. That’s why we’ve asked the Land Secretary to submit a report on how to determine realistic prices.

We might lower registration fees in some cases, but local government fees, like municipal taxes, might remain unchanged because those are legally determined.

We might not be able to solve all of this in this year’s budget, but it’s crucial for the future. Otherwise, this lack of transparency will persist nationwide, and land revenue will fall rather than increase.

bdnews24.com: There are various groups making demands. Are you feeling any pressure while preparing the budget in this situation?

Salehuddin: Of course, there’s pressure, there always is when you’re dealing with demands. We’re considering some of the demands, accommodating some.

What’s unfortunate is the situation with the NBR. Globally, the standard is to separate tax policy from tax administration. We’re now working towards that, to have a separate policy division, based on a standard.

Another new rule is that Statutory Regulatory Orders (SROs) can now only be issued by the Finance Ministry, if approved by the Finance Minister and passed in the Parliament. The NBR Chairman or a commissioner can no longer issue SROs. Now they’re making a fuss, asking why this authority is being taken away. This is now part of the law. That is why they’re upset.

The NBR has 25,000 to 30,000 employees. The policy division will consist of just 100 to 200 people: professional economists, statisticians, development specialists, who will determine where tax increases won’t create excessive burden.

I’ve told them that this change is in their interest. Instead of one secretary, now there’ll be two. One may not come from their background, but the other might. Around the world, secretaries don’t always come from cadres. In fact, things are better now, commerce and finance secretaries are overseeing tax matters. So why are they so fixated on the NBR secretary role?

They complain that “none of us have ever been secretaries.” But if you look at the last 33 years, three or four secretaries have come from the NBR. I’ve told them: come, sit down, let’s talk this through and find a solution together.

bdnews24.com: People want to know about reforms, elections, and the budget. You've already worked with a budget from the previous government, and now you're presenting a new one, likely to be implemented by a new government. Can you tell us more about that?

Salehuddin: What we're doing isn’t drastically different, no major changes. Many people are asking why we're doing a full budget when a six-month “policy” might suffice. But the Constitution requires us to present a financial statement for a full year. We're implementing some key aspects now. If someone wants to reduce the taxes later, they’re welcome to do so. But in reality, such revisions rarely happen.

Our main message is that this budget is designed with ordinary people in mind, and we hope future governments will carry it forward. If the next government feels the public doesn't support it or there is strong opposition, they can always change it.

The public is much more aware now. Everyone will compare what we have done to what they will be doing. Gone are the days when people quietly tolerated everything. People now speak up, without hesitation.

We’re calling this a reform-oriented budget, aiming to build a sustainable system. Previously, the benefits of development went to a limited group: bankers, MPs, business owners, and tech company heads. They held control over everything, and the rest of the population was left out. The inequality has grown to the point where implementation has become a serious challenge. Whatever we try to implement runs into complications somewhere.

Adani is producing electricity but not paying tax, that doesn’t happen in any other country. And when we try to hold them accountable, they threaten us with shutting the project down. Now businesses are saying, “If they could get concessions, why can’t we?” You’re asking whether there’s pressure? The NBR chairman used to hand out special favours daily. Now everyone is coming to me saying, “Do something for me too.” And I’m saying, no, I won’t. Zero.

bdnews24.com: There's talk of six underperforming banks being temporarily taken under government control. Does the budget include any measures regarding the banking sector, money laundering, loan defaulters, or stock market manipulation?

Salehuddin: We’ve prioritised the stock market issue from the start. You'll see that the individuals and institutions involved in manipulations have been identified. It took a bit of time. Some question why it took six to nine months, but these things aren’t easy to uncover. Still, we did it. Many of their accounts have been frozen. Several of those involved in market manipulation have been removed. We're making an effort, but regulation alone isn’t enough, we also need to encourage them.

In the banking sector, we’ve put forward a solution. For small depositors, we’ve made arrangements to return their money. For large depositors, we’re working on ways to repay them in the form of bonds or shares.

The assets of these six banks have been audited. Based on that, we'll determine how much funding is needed to reform them. Bangladesh Bank is currently assessing this. The IMF has also weighed in, but let’s not say the amount they’re suggesting.

In their words, these banks need to be “rescued”. That is, whoever has suffered losses needs to be compensated. Some of these banks may have to be shut down altogether if recovery seems impossible. We’ve allocated Tk 220 billion for these banks.

But not all of them can be saved. Some are like abandoned ships, like the Titanic. When all hope is lost, even the captain jumps overboard. That’s the kind of situation we’re facing. However, a Bank Resolution Ordinance has been passed. Boards have already been reshuffled. We're working on the state-owned banks.

As for money laundering, we’re making progress there too. Twelve cases have already been identified, with many more to come. But it will take time.

Some say we should wait before we begin reforms. But when it comes to economic reform, we’re not waiting for an election. We're saying reform is necessary regardless of the election, and we’ve already started working on it. It’s an ongoing process, not something that will be completed overnight.

Elections will not be free and fair without political reform, and that is the biggest challenge. If elections are not credible, the country risks sliding back to the same situation from the 90s. An election will simply replace one government with another, again and again. But unless accountability and transparency are ensured, everything will become difficult.

[Writing in English by Zakia Rubaba Hoque]