On Sunday, 30 June, 2024, the Bangladesh parliament approved the Tk7,97,000 crore national budget for FY25, setting ambitious targets of 6.75% economic growth and maintaining annual inflation around 6%. Finance Minister Abul Hassan Mahmood Ali presented the Appropriations Bill 2024, which sought a substantial budgetary allocation of Tk12,41,752 crore. The bill was passed by voice votes.
The preceding Saturday saw the passage of the Finance Bill 2024, which included minor amendments. Following the Finance Ministry’s proposal for parliamentary approval of funds necessary for development and non-development expenditures, ministers provided justifications for their respective budgetary demands through 59 grant requests.
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Despite opposition members proposing 251 cut-motions across various ministries, all were rejected by voice vote. Seven MPs, including Jatiya Party’s Mujibul Huq and Hafiz Uddin Ahmed, and Independent MP Pankaj Nath, among others, were permitted to discuss issues related to the Law Ministry, Secondary and Higher Studies Division, and Social Welfare Ministry.
FY2024-25 Budget Overview:
- Total budget size: Tk7.97 lakh crore.
- Annual Development Program (ADP): Tk2.65 lakh crore.
- Economic growth target: 6.75%.
Largest Budget in Bangladesh’s History
On the Finance Bill front, legalizing undisclosed money at a 15% rate remained a contentious yet included provision. The bill, moved by Finance Minister Ali and passed by voice vote with Speaker Dr. Shirin Sharmin Chaudhury presiding, incorporated 16 minor amendments in sections 2 and 2-Ka and Schedule 3, while rejecting 11 others.
Amidst deliberations, the highest tax rate was maintained at 25%, lowering from the proposed 30%, preserving progressive taxation principles crucial for equitable fiscal policies. The income tax structure was delineated with a tax-free threshold of Tk350,000, followed by graduated rates of 5%, 10%, 15%, 20%, and 25% for subsequent income brackets.
| Budget at a glance | FY 2025 | FY 2024 (Revised) |
|---|---|---|
| Revenues | 5,41,000 | 4,78,000 |
| Operating Expenditure | 5,06,971 | 4,53,228 |
| Development Expenditure | 2,81,453 | 2,60,007 |
| Total – Expenditure : | 7,97,000 | 7,14,418 |
| Overall Deficit: | – 2,56,000 | – 2,36,418 |
| (In percent of GDP) : | – 4.6 | – 4.7 |
| Foreign Borrowing-Net | 90,700 | 76,293 |
| Domestic Borrowing | 1,60,900 | 1,56,625 |
A pivotal component of the fiscal strategy introduced under the Finance Bill 2024 is the provision to legalize undisclosed income, offering a window from July 1, 2024, to June 30, 2025, with a flat tax rate of 15%. Companies are also allowed to regularize undisclosed funds through the same mechanism, contributing to enhanced financial transparency and compliance.
Additional amendments stipulate surcharges on individuals with multiple vehicles while exempting companies from this requirement. Mandatory tax return submissions are now applicable solely for income from city corporation community center bookings. Notably, income derived from universal pension schemes is exempt from taxation, underscoring initiatives to support retirement security.
Furthermore, a significant amendment exempts donations or gifts within family members from source tax, while audits will be waived if tax returns demonstrate a 15% increase in income compared to the previous fiscal year.
Prime Minister Sheikh Hasina emphasized the strategic significance of the proposed FY2024-25 budget, highlighting its scale as the largest in Bangladesh’s history at Tk7.97 lakh crore, inclusive of a robust Tk2.65 lakh crore Annual Development Program (ADP) and a targeted economic growth rate of 6.75%. Addressing critiques of the budget’s ambition and fiscal sustainability, she expressed confidence in Bangladesh’s capacity to meet these challenges through rigorous implementation and proactive economic policies.
Parliament Rejects 251 Cut-Motions
Prime Minister Sheikh Hasina acknowledged the constructive criticism received, emphasizing that while achieving 100% implementation may be challenging, the government remains committed to realizing its strategic objectives through this budget.
Highlighting the historical context, Prime Minister Hasina underscored that the budget allocation of TK7.97 lakh crore represents a significant leap from TK62,000 crore during the previous BNP-Jamaat alliance regime. Emphasizing the non-negotiable nature of the Annual Development Program (ADP) allocation, she asserted that every component serves a crucial role in advancing national development objectives.
Earlier, the parliament rejected a total of 251 cut-motions, which were proposed by opposition members on 59 demands for grants for different ministries.
This budget is the largest in Bangladesh’s history, with a total allocation of Tk 7.97 trillion, including a Tk 2.65 trillion Annual Development Program (ADP). Some critics have labeled the budget as overly ambitious or deficit-driven, but the Prime Minister confidently stated, “Taking on challenges is our duty. We aim to advance by embracing these challenges.”
Historical Subsidy Expenditure:
- Total expenditure since FY19: Tk 262.15 billion (US$2.38 billion).
- Yearly breakdown:
- FY19: Tk 25 billion.
- FY20: Tk 35 billion.
- FY21: Tk 24 billion.
- FY22: Tk 60 billion.
- FY23: Tk 63.15 billion.
LNG Imports Reach 23.265 Million Tonnes, Subsidy Surge Expected
The government’s subsidy for liquefied natural gas (LNG) procurement is set to increase by 27.27% year-on-year to Tk 70 billion in FY2024-25, starting from July 1. This rise comes despite a series of gas tariff hikes over the past six years and pressure from the International Monetary Fund (IMF) to phase out energy subsidies.
State Minister for the Ministry of Power, Energy and Mineral Resources, Nasrul Hamid, disclosed that in FY24, the Ministry of Finance allocated approximately Tk 55 billion for LNG subsidies. Since the commencement of LNG imports in 2018, the government has expended over Tk 262.15 billion (US$2.38 billion) on subsidies. Initially, in FY19, the subsidy was Tk 25 billion, escalating to Tk 35 billion in FY20, then declining to Tk 24 billion in FY21. Subsequently, it surged to Tk 60 billion and Tk 63.15 billion in FY22 and FY23, respectively.
According to the state-run Hydrocarbon Unit (HCU), Bangladesh imported 23.265 million tonnes of LNG by February this year. A senior Petrobangla official predicts an increase in LNG subsidies due to higher import and re-gasification costs surpassing the selling price of re-gasified LNG. With a 10% expansion in re-gasification capacity to 1.10 billion cubic feet per day (Bcfd), additional LNG procurement from the international spot market and long-term suppliers is expected to further increase subsidies.
In February 2024, tariffs were retrospectively hiked by 2.5-5.36%, affecting gas-fired power plants. The steepest increase occurred in January 2023, with tariffs rising by up to 178.88% for all domestic consumers, effective February 1, 2023, excluding households, fertilizer factories, compressed natural gas (CNG), and tea estates. The Bangladesh Energy Regulatory Commission (BERC) had previously raised tariffs by 22.78% in June 2022 and 32.8% in July 2019, marking significant increases since LNG imports began.
Sector-wise Consumption breakdown:
- Power generation: 37%.
- Industries: 23%.
- Captive power: 18%.
- Households: 10%.
- Fertilizer production: 7.0%.
- CNG: 4.0%.
- Commercial and tea industries: 1.0% combined.
Development Projects Prioritized More in the Budget
To foster Bangladesh’s ongoing development stride, the Asian Infrastructure Investment Bank (AIIB) has committed $400 million to Bangladesh for the ‘Climate Resilient Inclusive Development Program – Subprogram 1,’ formalized on 27 June. The loan aims to enhance climate resilience by enabling climate priorities across ministries, facilitating adaptation, and accelerating mitigation actions.
The loan spans 25 years, with a five-year grace period, a Reference Rate Variable Spread, and a 0.25% Front-End Fee. This aligns with Bangladesh’s broader economic strategy, which includes an Annual Development Program (ADP) for FY 2024-25 of Tk 2,650 billion, focusing on social infrastructure, physical infrastructure, and common services.
The government has approved an Annual Development Program (ADP) of Tk 265,000 crore, focusing on investment in physical infrastructure and human capital development. Notably, the budget allocates Tk 113,500 crore for debt payments, 14.24% of the total budget, highlighting concerns over the depreciation of the taka against the US dollar and the resulting increase in interest expenses.
Amid significant fiscal deficits, Bangladesh’s new budget reflects a strategic approach. The projected deficit is Tk 2,56,000 crore excluding grants, and Tk 2,51,600 crore including grants. Key allocations are Tk 2,06,569 crore for social infrastructure (25.92% of the total), Tk 2,16,111 crore for physical infrastructure (27.12%), and Tk 1,68,701 crore for the common service sector (21.17%).
To combat rising inflation and economic instability, the budget proposes enhancements in social security, including an increase of 500,000 beneficiaries and higher allowances for mother and child support by Tk 200, and for citizens over 80 years by Tk 300.
The budget also emphasizes investment in critical sectors such as compulsory education, health, and technology, demonstrating the government’s commitment to sustainable development and social equity amidst ongoing economic challenges.
