Asia St: Why Bangladesh’s New Budget Matters

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Why Bangladesh’s New Budget Matters

July 2, 2021

Bangladesh Prime Minister Sheikh Hasina (Photo Credit: Wikimedia Commons).

BGA’s Bangladesh team wrote an update to clients on the country’s new budget approved on June 29. The update addressed the context for the budget as well as potential consequences for companies and other relevant stakeholders.

Context

The new budget for fiscal year 2022 approved by parliament is the third consecutive budget placed by Finance Minister AHM Mustafa Kamal, under the government of Prime Minister Sheikh Hasina.

The budget came amid growing Covid-19 concerns. Titled “Bangladesh Towards a Resilient Future Protecting Lives and Livelihoods,” it spotlighted not only functional areas of focus, but also various steps that the government would take to mitigate the shocks from the Covid-19 pandemic.

Significance

The passage of the budget marks the second year in a row this has taken place with the government being relatively challenged. This is partly the product of the commanding majority by Hasina’s Awami League-led government and pandemic-related restrictions that limited debate.

The budget is aimed at making timely investments in sectors and keeping Bangladesh’s economy as being one of the better performing in the world. This includes significant outlays for healthcare, infrastructure, development spending and critical industries. Overall, the new budget is 17.4 percent of overall GDP — around 12 percent higher than the revised budget of the current fiscal year and 6.3 percent higher than the main budget. 

Implications

The government’s plans in the budget include significant implications across most sectors, including on tax policy, defense spending and general infrastructure investment. Some broader initiatives have been taken such as on financing meant to curb corruption in the government, but the government also backtracked on other measures including an earlier proposal of increasing the corporate tax rate for Mobile Financial Service (MFS) providers to 40 percent.

The recent resurgence of Covid-19 could complicate implementation. In particular, the budget anticipates robust growth targets and optimistic inflation assumptions that could be complicated by an uncertain global environment and the pandemic dynamics including the new variant.

The BGA Bangladesh team will continue to keep clients on updated on new developments as they occur in the coming weeks and months. For more information, please contact BGA Bangladesh Country Director K.M. Imran Al-Amin