Prime Minister Tarique Rahman has outlined a series of government plans in parliament to increase the country's tax-to-GDP ratio, including effective legal action against tax evasion, aiming to raise the ratio to 10% within five years and 15% by 2035.

The prime minister, who is in Moulvibazar on a visit, shared the plans in a written answer that was tabled in parliament today (17 June) as a response to a question from Munshiganj-1 MP Md Abdullah.

Abdullah had asked about plans to address Bangladesh's tax-to-GDP ratio, which currently stands between 7.3% and 8%, significantly lower than 23.1% of Nepal, which is a smaller economy.

In his reply, Tarique said the government has adopted various measures to increase the ratio, including the National Board of Revenue's Medium and Long-Term Revenue Strategy (MLTRS).

He said end-to-end digitalisation of the revenue division is underway, along with expansion of online tax deduction management, reduction of unnecessary tax exemptions and holidays, and simplification of tax laws.

The government is also analysing information from various institutions to determine tax risks, strengthening risk-based audits and investigations using sector-specific average indicators, and enriching the taxpayer database, he said.

He added that the government has introduced AI-based online services for taxpayers and awareness programmes to ensure compliance with tax laws, while also taking effective legal action against tax evasion.

The prime minister also mentioned the formulation and implementation of the Tax Expenditure Policy and Management Framework 2026 to minimise tax expenditures.

The government is strengthening revenue collection from post-clearance audits, pending cases, auctions, bank guarantee encashment, unsettled bills, and deferred payments, he added.

The National Tariff Policy 2023 is being implemented in phases, along with the Customs Strategic Plan 2024-2028.

"I hope implementing these plans will make it possible to raise the tax-GDP ratio to 10% within five years," the prime minister said in his written reply. "Additionally, various initiatives have been taken to achieve the target of 15% by 2035, including the implementation of the Strengthening Domestic Revenue Mobilisation Project and rationalising tax exemptions."

The government’s proposed tax incentives and duty cuts for electric vehicles (EVs) in the fiscal year 2026-27 budget are expected to give a significant boost to Bangladesh’s nascent EV market, industry insiders said.

The measures signal official recognition of electric mobility and could accelerate the country’s shift towards cleaner transport. However, some business leaders warn that the incentives may favour imports over domestic manufacturing.

In the proposed budget, the government has extended tax incentives for electric buses and trucks until June 30, 2030, to reduce pollution and strengthen energy security.

It has also proposed substantial tax cuts on imported EVs. The total tax burden on electric cars valued at up to $25,000 will fall to 64 percent from 93 percent, while EVs priced at up to $50,000 will face an 80 percent tax burden.

To support charging infrastructure, all customs duties and taxes on imported EV chargers and charging stations will be removed from the current 39.75 percent rate. Tax concessions have also been extended

To support charging infrastructure, all customs duties and taxes on imported EV chargers and charging stations will be removed from the current 39.75 percent rate. Tax concessions have also been extended to EV manufacturing, battery production, and commercial electric buses and trucks.

According to the Bangladesh Road Transport Authority (BRTA), 669 EVs had been registered in the country as of May 14, 2026.

Formal EV registration began only in September 2022, after the authority introduced guidelines allowing battery-powered vehicles to be registered for the first time. Registrations have risen steadily since then, driven by changing consumer preferences, higher fuel prices and growing awareness of alternative transport options.

At the same time, the government is raising taxes on conventional vehicles. The total tax burden on imported petrol and diesel cars with engine capacities between 1,200cc and 1,600cc is proposed to increase to 155.88 percent from 132.36 percent.

Plug-in hybrid electric vehicles (PHEVs) will also receive tax relief. The total tax burden on PHEVs of up to 1,800cc will fall to 73.44 percent from 93.16 percent, while those of up to 2,000cc will see taxes reduced to 96.10 percent from 132.36 percent.

Business leaders have welcomed the government’s push towards electric mobility but voiced concerns about its implications for local industry.

Hafizur Rahman, chairman of Runner Group, the Bangladesh distributor of Chinese EV maker BYD, said the proposed duty cuts would primarily benefit higher-income consumers purchasing relatively expensive EVs, while offering limited advantages to buyers of lower-priced models.

He also questioned the decision to allow duty-free imports of completely built-up (CBU) electric trucks, arguing that it would do little to create jobs.

Duty-free imports of truck chassis, by contrast, would support local body-building companies, he said. At least 20 such firms have already been established in Bangladesh and could generate employment if given greater opportunities.

“The government should prioritise industrial development and job creation when formulating fiscal policies,” he said.

Rahman argued that the proposed budget offers stronger incentives for trading than for manufacturing and industrial expansion.

Despite these concerns, companies investing in local EV production welcomed the measures.

Mir Masud Kabir, managing director of Bangladesh Auto Industries Limited, which is establishing the country’s first EV manufacturing plant at Bangabandhu Sheikh Mujib Shilpa Nagar, described the duty concessions as an important acknowledgement of the sector’s potential.

He said the measures reflect the government’s commitment to cleaner transport while strengthening confidence among consumers and investors.

According to Kabir, the incentives could help lay the foundations for a domestic EV ecosystem. However, he cautioned that low-duty imports could intensify competition in the commercial EV segment.

Some Chinese manufacturers, he said, can export EVs at prices below production costs, giving them a significant competitive advantage. Without adequate policy support, local manufacturers may struggle to compete with imported vehicles, Kabir added.

He stressed the need for a balanced policy framework that promotes EV adoption while supporting domestic manufacturing, technology transfer, industrial development and employment.

The government’s decision to cut duties on EVs while raising taxes on petrol and diesel vehicles with engine capacities between 1,200cc and 1,600cc is likely to increase vehicle prices for middle-income consumers and affect the reconditioned car market, according to BARVIDA President Abdul Haque.

Haque said Bangladesh’s automotive sector, including its servicing and technical infrastructure, remains largely geared towards conventional and hybrid vehicles.

He also questioned the revised engine-capacity bands, noting that the market has traditionally been structured around 1,000cc, 1,300cc and 1,500cc categories. The changes, he said, could create uncertainty for importers and buyers.

QatarEnergy is ready to resume liquefied natural gas production ​at its Ras Laffan LNG plant very quickly ‌and could reach within a month full output of facilities unaffected by Iranian strikes, a person with knowledge of the matter told Reuters ​on Tuesday (16 June).

Two of Qatar's 14 LNG trains and ​one of its two gas-to-liquids (GTL) facilities were damaged in ⁠the strikes, which knocked out 17% of the country's ​LNG export capacity, and will take years to repair, the ​group's CEO told Reuters in March.

However, production at other facilities, idled because of the de facto closure of the Strait of Hormuz oil ​and LNG export gateway for the region during the Iran ​war, could be quickly restored, the source said.

"The problem will be how ‌fast ⁠can we bring ships in and how fast we can load them after the strait opens," the person, who declined to be named, told Reuters. "It's more of a shipping ​and logistics problem ​than production."

Despite ⁠a framework agreement between the US and Iran on terms to end their war and reopen ​Hormuz, a little more than a dozen LNG ​tankers ⁠have managed to exit the strait since the war began in late February.

Shippers are awaiting reassurance on safety to cross the ⁠strait, ​including the clearing of mines, which ​could delay a return to normal shipping traffic by weeks.

Bangladesh's first budget by the newly elected government sets "ambitious" revenue targets that may prove difficult to achieve given the country's weak track record in tax mobilisation and reform implementation.

Such is the just-presented budget's ratings coming from the New York-based outfit Fitch Ratings.

Finance and Planning Minister Amir Khosru Mahmud Chowdhury last Thursday rolled out his maiden budget in parliament for next fiscal year beginning July 01. The budget size is Tk 9.38 trillion and the revenue target set at highest-ever Tk 6.95 trillionPersonal finance e-book

The revenue-to-GDP ratio is 10.2 per cent, up from around 8.0 per cent in the outgoing financial year (FY2025-26), also the highest level since 1993.

"Revenue collection will be the main test of fiscal performance, as the budget projects nominal revenue growth of 18 per cent year on year alongside a 19-percent increase in public spending," says Fitch in its latest analysis on Bangladesh budget.

It mentions that to boost revenue, the government has proposed simplified tax procedures, a reduction in tax exemptions, easier VAT compliance for small and midsize enterprises (SMEs), and higher non-tax income from state investments in state-owned enterprises, corporations and banks.

While these measures could gradually broaden the tax base, Fitch says, weak implementation has limited the effectiveness of past reform efforts.

The global ratings agency notes that higher spending commitments make successful revenue mobilisation even more important. Social protection-and welfare programmes account for 29.7 per cent of total expenditure, while physical infrastructure receives 18.7 per cent, reflecting the new government's election pledges.Bangladesh economic report

However, as a saving grace, Bangladesh's longstanding tendency to underspend budget allocations could help contain the fiscal deficit if implementation again falls short of targets.

Fitch says energy-sector initiatives outlined in the budget could support medium-term economic growth if effectively implemented.

More than 40 per cent of the country's power-generation capacity is gas-based, and the budget prioritises domestic gas exploration, efficiency improvements in generation, transmission and distribution, and enhanced infrastructure for liquefied natural gas (LNG) imports.

The agency also says that Bangladesh has sought a new programme from the International Monetary Fund (IMF), while completion of the final review under the current arrangement, which expires in January 2027, appears increasingly unlikely. Any agreement on a new reform agenda could take time, leaving the budget's credit implications largely dependent on the government's ability to improve revenue mobilisation and investment execution.

Fitch also questions the government-set growth assumptions.

The authorities expect real GDP growth of 6.5 per cent in FY27, compared with Fitch's forecast of 3.5 per cent.

The agency cites a still-fragile banking sector, weak private-sector credit growth, policy shortcomings and an uncertain external environment as key factors continuing to weigh on investment and economic activity.

The Executive Committee of the National Economic Council (ECNEC) today approved five projects involving an estimated cost of BDT 70.03 billion.

Of the total project cost, BDT 45.36 billion will come from the government's own resources, while BDT 24.67 billion will be financed through project loans.

The approval came from the 13th ECNEC meeting of the current fiscal year (FY26) held at the Cabinet Division conference room at the Bangladesh Secretariat, with ECNEC Chairperson and Prime Minister Tarique Rahman in the chair.

Among the approved projects, three are new, while two are revised schemes.

The approved projects include one project under the Prime Minister's Office titled “Supporting Infrastructure Project for Chinese Economic and Industrial Zone”.

Three projects under the water resources ministry were also approved. These are: Rehabilitation of Muhuri-Kahua Flood Control, Drainage and Irrigation Project in Feni District (Phase-I); Karatoya River System Development Project, and the first revised project for protecting Talbaria area under Mirpur upazila and Komorkandi area of Shilaidaha Union under Kumarkhali upazila in Kushtia district from erosion by the Padma River.

In addition, ECNEC approved the third revised project titled “Establishment of One Technical School and College in Each of 100 Upazilas”.

The project is being implemented under the education ministry.

The meeting was also informed about four projects involving costs below BDT 500 million that had already been approved by the planning minister.

These projects are: construction of an Airmen Barrack Complex at Bangladesh Air Force Base Cox's Bazar; establishment of Navy School and College at Savar; construction of physical infrastructure for improving educational standards and teaching capacity at BAF Shaheen College under Bangladesh Air Force Station Shamshernagar; and the fourth phase of the Pagoda-based Pre-primary and Tripitaka Education Programme.

The meeting was attended by Finance and Planning Minister Amir Khosru Mahmud Chowdhury; LGRD and Cooperatives Minister Mirza Fakhrul Islam Alamgir; Foreign Minister Dr Khalilur Rahman; Industries, Textiles and Commerce Minister Khandakar Abdul Muktadir; Road Transport, Bridges, Railways and Shipping Minister Shaikh Rabiul Alam; Home Minister Salahuddin Ahmed; Education and Primary and Mass Education Minister Dr A N M Ehsanul Hoque Milon; Water Resources Minister Md Shahiduddin Chowdhury Anee; State Minister for Planning Zonayed Abdur Rahim Saki and senior government officials.

The market valuation of Beximco Limited has witnessed a catastrophic decline, losing around Tk4,860 crore in just six trading sessions following the withdrawal of its floor price.

The flagship company of the Beximco Group saw its share price plunge 47% to Tk58.60 by Tuesday from the floor price of Tk110.10, which had remained in place for more than two years.

The free-fall began after the Bangladesh Securities and Exchange Commission (BSEC) lifted the trading restriction on 9 June to restore market-based price discovery for major stocks, including Beximco and Islami Bank Bangladesh PLC.

Unlike Islami Bank, which recovered after a central bank-led board restructuring, Beximco has continued to hit the lower circuit breaker with virtually no buying interest.

Market data reveals an extreme lack of liquidity for the scrip, as buyers have almost entirely shunned the stock. Despite crores of shares being placed for sale by panicked investors, only a meagre 77,327 shares changed hands during these six days.

Market analysts attribute the collapse in investor confidence to the severe crisis facing the group following the imprisonment of its vice chairman, Salman F Rahman, after the change in the Awami League-led government.

Industry sources suggest that the company's vast industrial operations have ground to a near halt, while several banks have initiated legal proceedings over massive loan defaults.

The company's outlook has been further clouded by regulatory and legal challenges. In late 2024, the BSEC appointed independent directors to Beximco Limited, Beximco Pharmaceuticals and Shinepukur Ceramics on instructions from the Financial Institutions Division. The move was challenged in the High Court, where the case remains pending.

Beximco has also failed to approve or publish financial statements since December 2024, raising concerns over transparency. Its latest available report for the first half of FY25 showed a loss per share of Tk3.78.

Meanwhile, the company remains under pressure from a court-backed move to place Beximco Group firms under receivership. Acting on a writ petition filed in September 2024, the High Court directed Bangladesh Bank to appoint a receiver and attach the group's assets.

The Appellate Division largely upheld the order in November 2024, exempting only Beximco Pharmaceuticals, to prevent asset dissipation and facilitate the recovery of allegedly laundered funds.

As of May 2026, general and institutional investors collectively hold more than 66% of the company's shares. With no financial updates, no dividends since a minor stock payout in 2024, and a share price that continues to hit the lower circuit breaker daily, investors see little hope for a near-term recovery.

Analysts warn that as long as the operational paralysis and legal disputes regarding the group's massive liabilities remain unresolved, Beximco Limited will continue to weigh heavily on the market's total capitalisation.

Despite efforts by Bangladesh Bank to promote a cashless economy, cash remained the country's preferred payment method in 2025, accounting for 67.2% of total transaction value, according to the central bank's latest annual report.

Central bank data show that digital channels made up the remaining 32.8% of transaction value, highlighting the slow pace of the transition towards digital payments.

Informal economy a major hurdle

Experts say the persistence of cash reflects the size of the informal economy, where a significant portion of transactions remains outside the formal banking system.Although mobile financial services, digital banking and QR-based payment solutions have expanded rapidly, many businesses and individuals continue to prefer cash for convenience and to avoid greater financial scrutiny.

Syed Mahbubur Rahman, managing director and CEO of Mutual Trust Bank, said, "The country's informal sector remains outside the banking system. A large share of economic transactions takes place there in cash, and we have not yet been able to bring these activities into formal financial channels."
Cash still accounts for 67.2% of transactions in Bangladesh despite cashless push

Zahid Hussain, former World Bank lead economist in Dhaka, said building a cashless society will remain difficult unless the informal sector is brought under the formal financial system.

"Large businesses in transport, agriculture and wholesale-retail trade continue to operate outside banking channels. Many of them are reluctant to join the formal system because doing so would expose them to taxation and regulatory oversight," he added.

Infrastructure, trust challenges

Bankers also point to infrastructure constraints as a major barrier to digital adoption.Many consumers still lack access to smartphones, reliable internet connections or the digital skills needed to use electronic payment systems.Small merchants and rural businesses often lack the infrastructure required to accept digital payments.

Mutual Trust Bank CEO Mahbubur said policy support alone will not be enough to accelerate the shift.

"Digital payment systems must become easier, more accessible and more convenient if we want people to adopt them on a larger scale," he added.

Md Touhidul Alam Khan, managing director and CEO of NRBC Bank, said banks face a dual challenge of ensuring security while making digital services simple enough for users with limited digital literacy.

He warned that fraud incidents, failed transactions and complicated interfaces may erode trust and push users back toward cash.

The banker also stressed the need for an inclusive transition, saying the objective should be to expand consumer choice rather than eliminate cash.

Digital payment adoption remains sluggish even as the country continues to bear the substantial costs of a cash-driven economy.

According to banking sector estimates, Bangladesh spends between Tk20,000 crore and Tk22,000 crore annually on printing currency notes.

The Japan-Bangladesh Chamber of Commerce and Industry (JBCCI) has welcomed the proposed national budget for the fiscal year 2026-27, saying it reflects the government’s efforts to maintain macroeconomic stability, control inflation, and create a more investment-friendly environment despite ongoing global economic uncertainty.

In a statement, the chamber said the budget’s focus on education, healthcare, social protection and employment generation demonstrates a commitment to inclusive and sustainable growth. These priorities, it noted, are crucial for developing the skilled workforce needed to support Bangladesh’s economic transformation.

JBCCI also appreciated the government’s emphasis on the private sector as a key driver of growth. Measures aimed at improving the business climate, encouraging industrial diversification, boosting exports and attracting foreign direct investment were described as positive signals for the international business community.

The chamber particularly welcomed initiatives to digitalise tax and customs administration, including automated VAT registration, expanded online compliance systems, recognition of ERP-based documentation and more structured audit procedures. It said these measures could improve transparency, reduce administrative burdens and make business operations more predictable.

Reforms related to customs modernisation, bonded warehouse operations, logistics and free trade zones were also praised.

According to JBCCI, efficient customs procedures and modern logistics infrastructure are among the most important factors considered by Japanese manufacturers and global supply chain operators when selecting investment destinations.

The chamber further welcomed incentives for emerging sectors such as electric vehicles, battery technology, semiconductors, advanced electronics and medical devices, saying they could help attract quality investment, encourage technology transfer and create skilled jobs.

JBCCI noted that the budget comes at a significant moment in Bangladesh-Japan economic relations as the two countries prepare to implement the Bangladesh-Japan Economic Partnership Agreement (EPA).

The agreement, combined with ongoing domestic reforms, could strengthen bilateral trade and investment while deepening Bangladesh’s integration into global supply chains.

While expressing support for the budget’s overall direction, the chamber stressed that effective implementation remains critical.

It said timely issuance of rules, clear operational guidelines and consistent interpretation by authorities will be essential to ensure the intended benefits reach businesses.

The chamber also called for greater regulatory predictability, reliable digital systems and continued efforts to reduce the cost of doing business through improvements in logistics, energy supply and administrative processes.

It emphasised the need for continued investment in trade infrastructure and stronger collaboration between industry, universities and technical institutions to develop skills in advanced manufacturing and technology sectors.

Although a Bangladeshi team is not taking part in the FIFA World Cup 2026, products “made in Bangladesh” have still made their way to football’s biggest stage.

Jerseys manufactured in Bangladesh were worn by the Cape Verde national team during their World Cup debut match against Spain in Atlanta on Monday night, a game that ended in a draw.

The jerseys were produced by Garments Manufacturing and Assembling Ltd (GMA), a factory located in Dhaka’s Turag area. The company supplied 5,000 player jerseys through New York-based sportswear company Capelli Sport.

“Not only the 5,000 jerseys for the players, but also 13,000 fan jerseys of different countries were exported through Capelli Sport,” GMA Manager Showmik Barmon told The Daily Star over the phone.

Fan jerseys are sold to supporters in stadiums, while player jerseys are worn directly by national team players at the World Cup.

GMA, established in 2019, has been producing sports garments and supplying them to Capelli Sport from the beginning, Barmon said.

Capelli Sport placed the order in January this year, and GMA delivered the jerseys to Cape Verde in March. Each player’s jersey was sold at $8, he added.

Barmon also said that making football jerseys requires Coolmax fabric, which is made from special yarn designed to reduce sweating during matches.

Another local garment giant, Youngone Corporation, supplied the fabric to GMA after importing the special yarn.

Although GMA has produced sports garments since its inception, this is the first time it has supplied player jerseys for a FIFA World Cup, he added.

Bangladesh supplies jerseys for major global sporting events, including football and cricket World Cups and other international tournaments, and has built a strong position in the global garment industry with high production capacity, becoming one of the world’s leading apparel suppliers after China.

Its garments have also become popular among European football fans, especially young supporters who travel to stadiums to watch club football and cricket matches.

“It is true that during the FIFA World Cup, jersey exports increase every four years, but Bangladesh exports jerseys and sports garments every day,” said Mohammad Hatem, president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA).

He added that Bangladesh is a preferred destination for all types of garment products, as local manufacturers have the capacity to produce high-end, value-added items with their existing production facilities.

Myanmar’s inflation spiked to nearly 25 percent as shocks from the Middle East conflict compounded the effects of the country’s civil war, the World Bank said Tuesday.

The Bank also slashed its growth forecast for the financial year that started in April, citing “a less favorable external environment”.

Myanmar has been mired in civil war since the military snatched power in a 2021 coup, plunging it into a half-decade of instability and a backslide into poverty for many of its more than 50 million citizens.

The country also imports 90 percent of its fuel oil, according to official figures, leaving it highly exposed to closure of the Strait of Hormuz since the US-Iran war started on February 28.

That sent inflation to as high as 24.6 percent on-year in April, according to the Bank’s biannual Myanmar Economic Monitor report, which also saw officials cut their 2026-27 economic growth outlook to two percent, from three percent previously estimated.

Myanmar’s economy is “stabilising at low levels” the World Bank said, but “a renewed fuel shock magnifies longstanding structural weaknesses and leaves the outlook highly vulnerable to further disruption”.

“The fuel shock has reignited inflation pressures,” senior economist Kemoh Mansaray told reporters.

“What this means is household purchasing power has gone down, and these households were already facing very thin buffers with high poverty levels.”

Inflation for the 12 months to the end of March came in at 21.1 percent.

The Bank’s report also said 2025 poverty levels hit 29.9 percent -- “still far above pre-2021 trends”.

“Because we’re struggling just to afford food, there are children we can’t send to school,” said one 28-year-old father in Yangon, speaking on condition of anonymity for security reasons.

“We have three school-age children at home,” he said.

A female Yangon shopkeeper -- also speaking anonymously -- complained soaring prices had crippled her business and family.

“Our income and expenses don’t match. We just manage day by day,” added the 45-year-old.

“Prices only go up, they never go down,” she said. “Now no matter how much we earn, it’s still not enough.”

The closure of the Strait of Hormuz has been particularly damaging to Asia, where 80 percent of oil transiting the seaway is bound, according to the International Energy Agency.

US President Donald Trump said Monday ships were again sailing through the strait after Washington and Tehran announced a deal to end the war, and claimed the oil route would be “completely open” by Friday.

However analysts warn economic recovery from the conflict will be a long process.

Oil prices slid to fresh three-month lows on Tuesday as markets weighed prospects for a resumption of supplies through the Strait of Hormuz alongside weaker physical demand and scant details on a preliminary deal to end the Iran war.

Brent crude futures were down $1.44, or 1.7 percent, at $81.73 a barrel, the lowest since March 10, at 0906 GMT.

US West Texas Intermediate was down $1.55, or 1.9 percent, at $79.20 a barrel, also the lowest since March 10. Oil prices had already dropped nearly 5 percent on Monday to their lowest close since March 4 after US President Donald Trump said a memorandum of understanding had been signed to end the US-Israeli war with Iran, though full details have not been released. Iranian Foreign Minister Abbas Araghchi said on Tuesday Iran and the US would start a new round of talks in Switzerland on Friday to reach a final agreement after the start of an interim deal. He warned that any Israeli attack on Lebanon or continued presence on Lebanese territory would breach the interim agreement.

INVESTORS EYE STRAIT REOPENING

The conflict led to the closure of the Strait of Hormuz, which typically carries about one-fifth of global oil supplies. Some analysts expect flows through the strait to resume soon, adding to downward pressure from already soft physical markets. Goldman Sachs lowered its fourth-quarter Brent forecast to $80 a barrel from $90 and cut its 2027 average estimate to $75 from $80, saying it now assumes Gulf exports return to pre-war levels by the end of July rather than late August. A range of indicators has pointed to weakening physical oil markets in recent weeks, Morgan Stanley analysts said in a client note. China’s crude imports slumped 29 percent in May to their lowest in eight years, extending a sharp decline for the world’s largest importer, with shipments of Saudi crude also expected to fall in July. Early indications suggest the US-Iran deal would reopen the blockaded Strait of Hormuz and extend a ceasefire for 60 days, buying time for negotiations on issues including Iran’s nuclear programme.

But with details still unclear and a permanent truce yet to be secured, analysts say volatility risks remain. Suvro Sarkar, the head of DBS Bank’s energy research, said the deal’s first phase - encompassing the Geneva signing of the ceasefire extension - was easy. The second phase - the reopening of the Strait of Hormuz and winding down the US naval blockade on Iranian ports and vessels - would be watched closely by markets, he added. “Anything other than a clean simultaneous unlock will mean renewed volatility in oil prices,” Sarkar said. “Given the trust deficit so far, it will be interesting to see how this plays out over the next couple of weeks.”

The Bank of Japan lifted its key policy rate to a 31-year high of 1.0 percent on Tuesday, warning of the risk of heightening inflation risks stemming from elevated crude oil prices due to the Middle East conflict and the weak yen.

The central bank, in the absence of Governor Kazuo Ueda who has been hospitalized for medical treatment, raised the short-term interest rate from 0.75 percent in its first hike since December, saying that the recent U.S.-Iran agreement to end the war is a positive development but still leaves uncertainties over the economy. The bank’s rate hike after keeping it steady at the three previous meetings brings its policy back on a normalization track after a decade of unorthodox easing that ended in March 2024.

The BOJ said in its statement that there is a risk of underlying inflation rising above its target of 2 percent as rises in crude oil prices lead companies to hike prices in business-to-business transactions “at a relatively fast pace,” which could “spread to an increase in consumer prices across a wide range of items.”

BOJ Deputy Governor Shinichi Uchida told a post-meeting press conference that the bank will continue to raise the rate to stabilize inflation at around the 2 percent target, judging that even after the latest hike financial conditions remain accommodative.

Uchida said that one of the major reasons behind the rate hike decision is reduced risks to the economy due to factors such as government measures to secure alternative sources of raw materials including imports of oil from regions other than the Middle East.

Uchida also said that the bank is watching currency moves carefully. On Tuesday afternoon in Tokyo, the U.S. dollar was trading above the 160 yen line, the level where the Japanese financial authorities intervened in the currency market just over a month ago to support the yen.

“We do not target specific exchange rates in guiding our monetary policy, but we engage in policy discussions on the view that currency moves have a crucial impact on economic and price developments,” he said.

Among the remaining eight policymakers excluding Ueda who discussed the policy change, the rate hike decision was opposed by Toichiro Asada, who joined the Policy Board in April and is viewed by the market as a proponent of reflationary policies and in favor of aggressive monetary easing.

In another policy change, the bank said it will pause the plan to reduce Japanese government bond purchases from the next fiscal year starting in April, at a time when long-term interest rates have been rising rapidly.

It will keep the current pace of reducing monthly purchases by about 200 billion yen every quarter for rest of this fiscal year, which would result in buying of around 2.1 trillion yen ($13 billion) per month in the last quarter of fiscal 2026.

But from April 2027 onwards, the bank will no longer reduce but steadily buy about 2 trillion yen a month under the new plan, citing the need to stabilize the bond market.

The BOJ decided in July 2024 to cut back its monthly government bond purchases as part of its efforts to normalize its monetary policy.

While raising the key policy rate could cool the economy by increasing borrowing costs for companies, restraining investment and dampening private spending, the central bank saw the need to respond to inflation risks following the launch of U.S.-Israeli attacks on Iran in late February and subsequent surges in crude oil prices.

The yen repeatedly falling to the 160 zone against the dollar, despite the Japanese authorities intervening in the currency market from late April to early May to curb the unit’s fall, has also stoked concerns about rising import costs for resource-poor Japan.

Even if the U.S.-Iran conflict ends following the two countries’ agreement to end the monthslong war, shipping through the Strait of Hormuz may not immediately stabilize, keeping transport, raw material and other costs elevated, analysts said.

But the agreement will relieve fears of disruptions in Japan’s supply chains, serving to reinforce the view that the economy is resilient enough to withstand further rate hikes, they said.

The decision to raise the rate puts the BOJ in line with other central banks shifting toward tightening of monetary policy amid inflationary pressures, such as the European Central Bank, which hiked its rate last week.

The two-day policy meeting was chaired by BOJ Deputy Governor Ryozo Himino, after Ueda was hospitalized to treat a hepatic cyst infection. Ueda’s hospitalization is “short and there will be no significant impact” on the BOJ’s steering of monetary policy, Uchida said.

Inflation risks have been flagged after Japan’s wholesale prices rose 6.3 percent in May compared to a year earlier -- the biggest increase in over three years. Firms are increasingly passing on rising costs from the war in Iran to the prices of their goods and services.

The data suggested that core consumer inflation may also accelerate, although it has been kept below the bank’s 2 percent target because of government subsidies for electricity, gas and gasoline, the analysts said.

Never bet against Donald Trump? The oil market appears to have made a risky wager from day one of the Iran war: The US president would not allow the conflict to spiral into a full-blown economic crisis. So traders wouldn’t price one in, no matter what was happening with physical supplies. It was a risky call, but it proved correct.

Oil prices certainly swung during the three-and-a-half-month war, as Iran’s key weapon was the unprecedented closure of the Strait of Hormuz. Tehran was able to choke off a fifth of the world’s oil and liquefied natural gas supplies overnight, gaining significant leverage.

Benchmark Brent crude surged from around $70 a barrel before the war to a peak of $118 in late March, before sliding back to $83 after Washington and Tehran announced a preliminary deal on Sunday. Given that the supply disruption was one of the largest in modern history, these moves were remarkably restrained. Consider that oil prices surged to $123 a barrel in the aftermath of Russia’s full-scale invasion of Ukraine in February 2022. This reflected market fears about the partial disruption of Moscow’s oil exports, which had totalled around 7.5 million barrels per day (bpd) the previous year. That is around half the effective volume lost during the Hormuz blockade. For decades, a Hormuz shutdown has been treated as the ultimate doomsday scenario for oil markets. Yet when it finally happened, prices jumped, but they didn’t spiral.

BEND, DON’T BREAK

On the surface, the explanation is straightforward: the physical market did its job. The global energy system displayed extraordinary flexibility and resilience. Governments and companies released hundreds of millions of barrels from commercial and strategic stockpiles. Luckily for them, production had been running hot heading into the conflict, with inventories rising quickly, which helped cushion the blow.

Demand also adjusted. Once the war broke out, Chinese imports weakened sharply, and across much of Asia, governments imposed consumption curbs to dampen energy use. That helped prevent a deeper economic shock. The system bent, but it didn’t break. But that is only half the story, and arguably not the most important half.

TRUMP PUT

Look more closely, and the market’s response to the drawdown in global inventories tells a different tale. Stocks were depleted at an unprecedented pace during the war, falling at an average rate of 5.3 million bpd between March and May, according to the US Energy Information Administration. They were nearing dangerously low levels just as the northern hemisphere was entering peak summer demand. That should have been a flashing red warning sign. Instead, it appeared to reinforce confidence that a deal was near.

What explains this? The implicit bet was clear: Trump would not let the situation deteriorate to a point where US gasoline prices would surge to unmanageable levels and risk reigniting broader inflation, especially with midterm elections looming. Put simply, investors believed he would blink before the market cracked.

So the lower inventories fell, the closer a deal seemed. This pattern should be familiar. During Trump’s second term, markets have repeatedly learned to discount the most extreme outcomes implied by his rhetoric and initial policy moves, whether sky-high tariffs announced on “Liberation Day,” attacks on Federal Reserve independence, or threats to take over Greenland. His most aggressive moves have invariably been followed by retreats once financial markets began to wobble. The so-called “Trump put” is no longer just about equities, however. During the Iran war, it shaped commodity markets as well. Markets weren’t ignoring the risks. They were pricing in Trump’s limits.

YOU CAN ONLY GO SO FAR

But the oil market’s “Trump trade” has boundaries. Unlike equities, which can be buoyed by sentiment for extended periods, commodity markets are ultimately anchored in physical reality. And reality was catching up with the president – and energy traders. Despite the market’s remarkably effective response to the Hormuz shock, the loss of around 1.4 billion barrels of supply since the start of the war still punched a vast hole in global inventories. That gap has not disappeared. Yet the deal announcement has dramatically reduced the risk of a massive spike in oil prices – a warning that was sounded only two weeks ago. The challenge now is that supply and demand are unlikely to recover in step, pointing to a period of volatility.

On the one hand, demand could spike. Refiners, traders and governments that drained inventories during the crisis will have to refill them. That will create a new wave of demand that could tighten markets as summer demand peaks and supply buffers remain thin. The strain is already visible in the United States. After pushing exports to record levels during the crisis, US crude inventories have fallen to their lowest since 2004, while gasoline stocks are at their lowest since 2014.

On the other hand, supply could recover faster than many anticipate as revenue-starved Gulf producers scramble to regain market share. This could ultimately lead to a bigger price drop than traders are currently pricing in.

TRADING THE TRUMP

Throughout the war, Trump’s jawboning of oil markets was effective, repeatedly boosting investor expectations for a quick resolution even as conditions on the ground deteriorated. The US-Iran deal announced on Sunday was vague and offered limited gains for Washington. But it arrived just as the market was running out of room. Its timing was probably not a coincidence. Investors understood that Trump’s tolerance for market pain had limits, and those limits mattered as much as pipelines, tankers and storage tanks. They bet on it. This time, they were right.

Offshore-banking operations face setbacks following regulatory instructions downsizing the cost-ceiling rate on foreign-currency lending to businesses that dents profitability of commercial banks and may ultimately affect the economy.

As the spread on foreign-currency loans squeezes under the current macroeconomic sluggishness, some of the banks decide to lessen their concentration on offshore-banking operations, with the risk of disruption to trade financing and increase in pressure on the economy, according to the market players.Personal finance e-book

The Foreign Exchange Policy Department-1 (FEPD-1) of Bangladesh Bank earlier on May 11 issued a circular lowering the all-in-cost ceiling on short-term trade finance to the benchmark rate plus 3.0 per cent from 4.0 per cent.

Under the revised rule, the borrowing cost for short-term permissible trade finance in foreign currencies will be capped at a maximum of 3.0 per cent per annum over benchmark rates, including SOFR (Secured Overnight Financing Rate) and Euribor,

All in costs includes interest, commissions, fees and other charges associated with such trade and term financing in foreign currency.

Seeking anonymity, a BB official says, the central bank issued the latest instruction aiming to bring borrowing costs in line with global market trends.

He says many of the commercial banks can borrow foreign currency from the correspondent banks at rates in-between 2.20 per cent and 2.50 per cent per annum over the benchmark rates. "So, the spread (0.80 per cent to 0.50 per cent) is still lucrative as far as businesses concerned. But we want to reduce the import costs," the central banker adds.

According to market insiders, the market size of offshore banking operations is around $6.0 billion. By end of 2025, the major market players were BRAC Bank ($877 million), Prime Bank ($608 million), Pubali Bank ($464 million), Eastern Bank ($436 million), City Bank ($427 million) and Bank Asia ($238 million).

Shortly after the issuance of the circular by the banking regulator, the Association of Bankers, Bangladesh (ABB) requested the central bank to reconsider the recently revised all-in-cost ceiling for short-term import- trade finance in foreign exchange, warning that the new pricing framework could disrupt trade financing and increase pressure on the country's economy.Market trend analysis

In a letter to BB Governor Mostaqur Rahman, the ABB expressed concerns over the circular which fixed the ceiling for short-term import-trade finance at the benchmark rate plus 3.0 per cent per annum.

According to the apex body of the country's top commercial bank executives, commercial banks are heavily dependent on offshore borrowings and interbank foreign-currency markets because of the country's limited foreign-currency deposit base.

The prevailing market conditions and sovereign-risk premium have pushed the cost of foreign- currency funding close to the newly imposed ceiling, leaving little room for banks to operate profitably, the bankers argue.

Currently, well-rated private commercial banks secure short-term trade base financing in foreign currency lines at approximately SOFR+2.75 per cent. Once statutory costs are incorporated, the effective all-in cost rises to approximately SOFR+3.00 per cent for the banks.

Additionally, the funding cost exceeds SOFR+3.00 per cent in securing long-term funding, when upfront-arrangement fees on term facilities are amortized.

"In practice, the entirety of funds from long-term borrowing may not be exactly matched with long-term lending book. Banks often have to utilize these funds for short-term financing as well," the letter reads.Regional business directory

Unfortunately, banks face challenges to negotiate expected price with foreign counterparties at current country rating. With the imposed revised pricing level, the banks may face new challenges. It may result in banks not being able to adequately facilitate short-term financing needs of customers,

To address the issue, the ABB proposes two alternatives. The first recommendation calls for a phased reduction in the ceiling over a transition period, allowing banks sufficient time to adjust their funding structures and complete ongoing negotiations. The second proposal suggests setting the ceiling at benchmark rate plus 3.50 per cent and deferring its implementation by at least six months.

On condition of not being quoted by name, the offshore banking head of a private commercial bank says only three to four banks can make profit in doing offshore-banking business after the sharp reduction in the ceiling but majority will not be able to sustain.

"In fact, our bank decides to lessen concentration on the business as it will not be viable for us under the current circumstances," he told The financial Express.

Managing Director and Chief Executive Officer of Mutual Trust Bank (MTB) Syed Mahbubur Rahman says the 1.0-percentage-point reduction in the ceiling will certainly hit profitability in banks at a time when the space of making profit keeps squeezing due to prolonged economic sluggishness.Personal finance e-book

He says there are many banks that may lose interest as they will not be able to make some gains in offshore-banking business. "So, the income that the local banks can book would go outside and it will put more pressure on local currency," the experienced banker alerts.

ABB Chairman Mashrur Arefin says they have already sent a letter explaining the market situation to the central bank governor to reconsider the matter.

"We'll soon meet the BB governor with this serious issue," informs Mr. Arefin, also Managing Director and Chief Executive Officer of City Bank PLC.

Bangladesh could attract up to $100 million in investment through a proposed Orange Climate Fund as policymakers, investors and market leaders push for the development of a stronger, inclusive financial ecosystem to support sustainable and climate-resilient economic growth.

The investment prospect emerged at the Orange Economy Summit 2026 held in the capital on Tuesday, where stakeholders highlighted the growing role of innovative financing instruments and impact investment in mobilising long-term capital for Bangladesh's development priorities.

The summit, jointly organised by the Dhaka Stock Exchange (DSE), Impact Investment Exchange (IIX) and the Policy Research Institute of Bangladesh (PRI), focused on building Bangladesh's Orange Capital Ecosystem, expanding inclusive finance and attracting global capital to support the country's economic transformation, according to a press release.

Bangladesh Bank Deputy Governor Dr Md Habibur Rahman attended the event as chief guest. Senior government officials, regulators, representatives from financial institutions, corporate entities, development partners and international experts also participated.

Speaking at the summit, IIX Founder and Chief Executive Officer Professor Durreen Shahnaz said Bangladesh has been identified as a priority market under IIX's proposed $1 billion Orange Climate Fund, with plans to channel $100 million into the country.Market trend analysis

Bangladesh's graduation from least-developed country (LDC) status and its ambition to become a trillion-dollar economy would require a stronger and more inclusive financial market capable of attracting long-term investment, she said.

"Bangladesh has immense opportunities in sectors such as ready-made garments, agriculture, renewable energy and financial services," she said, adding that deepening the capital market is critical to unlocking these opportunities.

She described the Orange Movement as a global initiative aimed at building inclusive capital markets and mobilising $10 billion by 2030 through innovative financing structures that combine financial returns with measurable social and environmental impact.

Prof Shahnaz said IIX has facilitated more than $18 million in investments in Bangladesh over the past decade and supported the issuance of the country's first Orange Bond.

In his welcome remarks, DSE Managing Director Nuzhat Anwar said sustainable development requires a balance between economic growth, social inclusion and climate resilience.

She said the stock exchange remains committed to promoting sustainable finance, strengthening corporate governance and aligning with international standards.

Presenting a keynote paper, PRI Chief Economist Dr M Ashiqur Rahman said Bangladesh faces significant challenges in employment generation, climate adaptation and productivity enhancement as it moves towards becoming a trillion-dollar economy.Personal finance e-book

He observed that structural constraints in banking, capital markets, bond markets and venture capital financing continue to limit the availability of long-term funding for productive sectors.

Against this backdrop, he argued that orange capital could serve as an innovative financing framework capable of directing investment toward sectors that generate economic, social and environmental benefits simultaneously

Deputy Governor Dr Habibur Rahman said Bangladesh Bank has undertaken various initiatives to strengthen financial inclusion and women's economic empowerment.

Dr Rahman reaffirmed the central bank's support for efforts to attract orange investments and underscored the importance of positioning Bangladesh as a preferred destination for sustainable and impact-oriented capital.

Referring to the country's first Orange Zero-Coupon Bond issued through Sajida Foundation, he described the initiative as a landmark achievement for Bangladesh's capital market and a significant step toward developing a broader impact-investment ecosystem.

Bangla QR, Bangladesh’s interoperable quick response (QR) payment collection system introduced by the central bank, expanded to nearly 9.63 lakh merchants by the end of 2025, reinforcing its role in the digital payments ecosystem.

A total of 46 banks, seven mobile financial service (MFS) providers, and four payment service providers (PSPs) now offer the service, according to the Payment Systems Report 2025, published by the Bangladesh Bank (BB) on Monday.

More than Tk 2,700 crore worth of payments were processed through the system last year.

The latest data comes as the central bank seeks to use Bangla QR to achieve 80 percent digital transactions within the next decade and transform the country into a cashless, technologically empowered economy.

In April this year, the BB directed all banks, MFS providers, PSPs and payment system operators (PSOs) to replace proprietary QR codes at merchant points with Bangla QR by June 30, warning of penalties of up to Tk 30 lakh for non-compliance.

A total of 46 banks, seven mobile financial service providers and four payment service providers now offer the Bangla QR service

The central bank launched the interoperable QR-based settlement system in January 2023 to improve transparency, reduce risks, lower transaction costs and accelerate digital payments.

As part of its target of making 75 percent of transactions cashless by 2027, the authorities have already made QR payment facilities mandatory for obtaining or renewing trade licences nationwide.

The platform enables customers of participating banks and MFS providers to make payments using a single QR code, unlike proprietary systems that restrict transactions to specific providers.

According to the report, the payment network reached a major milestone in November last year when banks, PSPs, PSOs and MFS providers began conducting live interoperable transactions for the first time. The development allowed customers to transfer funds to any registered bank account, MFS or PSP wallet, regardless of the service used.

The central bank followed up on this on December 15, 2025, by approving instant settlement for Bangla QR transactions, a move aimed at improving liquidity for small traders.

BB data showed that nearly 66 lakh transactions were conducted through the payment system. However, Bangla QR still accounted for only a small share of transactions routed through the National Payment Switch Bangladesh (NPSB).

The report also showed that the total number of transactions across Bangladesh’s payment system rose 19 percent to 108 crore in 2025, although the overall value of transactions slipped 1 percent.

Alongside Bangla QR, the BB’s national debit card, TakaPay, also gained momentum in 2025. Introduced in November 2023 to reduce reliance on international card networks and lower transaction costs, TakaPay transitioned from magnetic-stripe cards to chip-based debit cards in June 2024, when nine banks first rolled them out. The report said 17 banks are now actively issuing TakaPay cards.

All TakaPay transactions are processed through the NPSB, giving cardholders’ access to around 16,500 ATMs and cash recycler machines, as well as approximately 130,000 point-of-sale terminals nationwide.

“This integration ensures seamless interoperability across participating banks, merchants, and ATMs, allowing cardholders to transact reliably regardless of their issuing institution. By consolidating transaction processing through a unified national switch, TakaPay eliminates fragmentation and establishes a cohesive foundation for digital payments,” the BB said.

The report said Bangladesh had 792,132 credit card users as of December 2025, making credit cards the smallest category of digital payment instruments, well behind the 82.3 lakh debit cardholders and 1.23 crore savings account holders.

The data highlighted a stark urban-rural divide. Cities accounted for 99.41 percent of credit card transaction volume and 92.69 percent of transaction value, leaving rural areas with just 0.59 percent of volume and 7.31 percent of value.

The BB attributed the disparity to structural barriers, including income documentation requirements, limited access to credit bureaus and merchant card-acceptance infrastructure that remains overwhelmingly concentrated in urban areas.

To narrow the gap, the central bank suggested expanding alternative digital credit models, such as transaction-based lending linked to mobile financial services usage, which could broaden access to credit without weakening risk controls.

Despite Bangladesh Bank's campaign to promote a cashless society, cash remains the dominant mode of payment in the country, accounting for 67.2% of total transactions in 2025, according to the central bank's latest annual report.

Data from Bangladesh Bank's payment systems department shows that digital platforms accounted for 32.8% of total transaction value during the year.

The figures, however, indicate gradual progress. In 2024, cash transactions accounted for 72% of total transactions, with the remainder conducted through digital channels.

According to the report, Tk209 lakh crore out of total Tk311 lakh crore was conducted in cash in 2025, while digital mode shared Tk102 lakh crore.

Digital payments include transactions through systems such as Real Time Gross Settlement, National Payment Switch Bangladesh, Bangla QR, internet banking and mobile financial services.

However, cash withdrawals and deposits through bank branches, ATMs or MFS agents are classified as cash transactions because physical money changes hands.

A transaction remains digital only as long as it stays within the digital ecosystem. Once cash is withdrawn or deposited, it is counted as a cash transaction, said a central bank official.

Informal economy remains a major hurdle

Experts say the persistence of cash reflects the size of the informal economy, where a significant transaction remains outside the formal banking system.

Although mobile financial services, digital banking and QR-based payment solutions have expanded rapidly, many businesses and individuals continue to prefer cash for convenience and to avoid greater financial scrutiny.

Syed Mahbubur Rahman, managing director and CEO of Mutual Trust Bank, said, "The country's informal sector remains outside the banking system. A large share of economic transactions takes place there in cash, and we have not yet been able to bring these activities into formal financial channels."

Dr Md Zahid Hussain, former World Bank lead economist in Dhaka, said building a cashless society would remain difficult unless the informal sectors are brought under the formal financial system.

"Large businesses in transport, agriculture, and wholesale-retail trade continue to operate outside banking channels. Many of them are reluctant to join the formal system because doing so would expose them to taxation and regulatory oversight," he said.

Infrastructure, trust challenges

Bankers also point to infrastructure constraints as a major barrier to digital adoption.

Many consumers still lack access to smartphones, reliable internet connections or the digital skills needed to use electronic payment systems. Small merchants and rural businesses often lack the infrastructure required to accept digital payments.

Syed Mahbubur said policy support alone would not be enough to accelerate the shift.

"Digital payment systems must become easier, more accessible and more convenient if we want people to adopt them on a larger scale," he said.

Dr Md Touhidul Alam Khan, managing director and CEO of NRBC Bank, said banks face a dual challenge of ensuring security while making digital services simple enough for users with limited digital literacy.

He warned that fraud incidents, failed transactions and complicated interfaces may erode trust and push users back toward cash.

The banker also stressed the need for an inclusive transition, saying the objective should be to expand consumer choice rather than eliminate cash.

Digital payment adoption remains sluggish even as the country continues to bear the substantial costs of a cash-driven economy. According to banking sector estimates, Bangladesh spends between Tk20,000 crore and Tk22,000 crore annually on printing currency notes.

With over 33,000 tax cases clogging appellate forums and tying up more than Tk1.10 lakh crore, the government has finally moved towards regional standards by cutting income tax and VAT appeal deposit requirements down to as low as 14% and 4%, respectively.

Businesses have welcomed the government's aggressive cuts to tax and VAT appeal deposits in the fiscal 2026-27 budget as it will boost their much-needed cash flow. However, fiscal experts cautioned that significantly lower deposits could inadvertently trigger a wave of prolonged litigation.

In 2018, the National Board of Revenue accused a company of evading Tk925 crore in VAT after auditing four years of its financial records. The company disputed the claim and challenged it before the VAT Appellate Tribunal and later in court, arguing that the audit was flawed. However, before its appeal could be heard, the company was required to deposit nearly Tk200 crore in two instalments.

Eight years later, the dispute remains unresolved. While the company has yet to be found guilty of tax evasion, the capital tied up in the legal process has doubled to nearly Tk400 crore when financing costs and interest expenses are considered.

"We had to borrow from banks to make the deposits. The case is still pending and we don't know when it will be resolved. Meanwhile, a significant amount of capital remains locked up, creating cash-flow pressures," a senior company official told The Business Standard.

Business leaders say the move could unlock crores of taka in working capital, reduce litigation costs and improve Bangladesh's investment climate.

Under the proposed Finance Bill, the cumulative deposit required for income tax appeals from the Commissioner (Appeals) to the High Court has been reduced from 35% of the disputed tax amount to 14%.

Infograph: TBS
Infograph: TBS

For VAT and customs disputes, the total deposit requirement has been reduced even more sharply from 20%-30% to only 4%.

At the tax tribunal stage, the deposit requirement has been cut from 10% to 2%, while High Court appeals will require significantly lower deposits than before.

The reforms are part of a broader government initiative to simplify tax administration, reduce the discretionary powers of tax officials and improve the ease of doing business.

In his budget speech, Finance Minister Amir Khosru Mahmud Chowdhury said the government is undertaking major reforms in the VAT system to make services more accessible to taxpayers and increase transparency in tax administration.

"Reducing the complexity and cost of tax dispute resolution will lessen financial and psychological burdens on businesses, which will ultimately support investment, production and employment generation," he said.

Businesses welcome long-awaited reform

Business chambers and foreign investors have long argued that Bangladesh's appeal deposit requirements were among the highest in the region and often discouraged taxpayers from pursuing legitimate appeals.

TIM Nurul Kabir, executive director of the Foreign Investors' Chamber of Commerce and Industry, described the reform as a long-awaited breakthrough.

"This has been one of the most consistent demands from the business community. Companies were forced to keep large amounts of capital tied up for years while cases remained unresolved. The reduction in deposit requirements will significantly improve cash flow and investor confidence," he said.

Md Rezwan Bin Rafique, head of taxation and fiscal compliance at Grameenphone, welcomed the reduction in the statutory appeal deposit requirement under both the income tax and VAT laws.

He said, "In Bangladesh, tax and VAT disputes often remain pending in the legal forum for several years. The previous appeal deposit requirements were creating significant cash flow pressures for taxpayers while disputes were under adjudication.

"The proposed reduction is a positive policy measure that will improve access to the appeal process, facilitate taxpayers' ability to exercise their legal right to appeal, and contribute to a more balanced and efficient dispute resolution framework."

Tax experts have broadly welcomed the reforms but warned that lower deposits could encourage some businesses to prolong disputes unnecessarily.

"Reducing the complexity and cost of tax dispute resolution will lessen financial and psychological burdens on businesses, which will ultimately support investment, production and employment generation."

Snehasish Barua, partner at Snehasish Mahmud & Co, said the success of the reforms would depend on taxpayer behaviour and faster case resolution.

"There is a possibility that some taxpayers may use the lower deposit requirements to keep disputes alive for longer periods. Businesses should not view the reform as an opportunity to delay legitimate tax payments," he said.

"What is equally important is ensuring that appeal cases are resolved within a reasonable timeframe."

Tax practitioners estimate that some cases currently remain pending for seven to 15 years before reaching final resolution.

Taskin Ahmed, president of the Dhaka Chamber of Commerce and Industry, said the proposed changes address a longstanding concern of businesses.

"Capital is the lifeblood of business. When a company has to lock up large sums of money for years before its case is heard, that capital cannot be used for expansion, innovation or job creation. Reducing appeal deposits is a positive step toward building a more investment-friendly tax system," he said.

According to Taskin, the reform aligns with broader efforts to improve Bangladesh's competitiveness as it prepares for LDC graduation and seeks to attract more foreign direct investment.

In many developed economies, including the United Kingdom, Australia and Singapore, taxpayers can challenge tax assessments without making large upfront deposits. Instead, authorities rely on risk-based enforcement, penalties for non-compliance and efficient dispute resolution systems.

According to tax policy experts, modern tax systems increasingly focus on quick dispute resolution rather than using high deposits as a deterrent against appeals.

Senior officials at the NBR say the reform is intended to ensure access to justice without compromising revenue interests.

"The objective is to create a fairer appeals process. Taxpayers should have the opportunity to challenge assessments without facing excessive financial burdens. At the same time, safeguards remain in place to prevent frivolous appeals," an official said.

Digitalisation and reduced discretionary powers

Beyond appeal reforms, the proposed budget introduces several measures aimed at modernising tax administration and reducing discretionary power.

Beginning in FY27, electronic VAT return submission will become mandatory, similar to income tax returns.

The government has also proposed simplified VAT return forms for small taxpayers, allowing them to file returns online using limited information.

At the same time, provisions have been included to reduce discretionary powers previously exercised by tax officials and commissioners.

Business leaders say these reforms could help reduce compliance costs, improve predictability and minimise taxpayer harassment.

NBR officials said reducing discretionary powers of tax officials would improve transparency and reduce opportunities for inconsistent decision-making.

The Dhaka Stock Exchange ended lower today (16 June), snapping a three-day winning streak as investors moved to lock in profits following a strong post-budget rally that had pushed the benchmark index above the 5,600-point mark.

The benchmark DSEX index of the premier bourse plunged by 35 points, or 0.62%, to close at 5,605, reflecting a cautious shift in investor sentiment after three consecutive sessions of robust gains.

Market analysts observed that while there was selective bargain hunting in attractively valued scrips, it proved insufficient to counter the broad-based selling pressure that intensified as the session progressed.

The blue-chip segment also faced a sharp correction, with the DS30 index slipping by 17 points to settle at 2,110.

Trading activity saw a noticeable contraction, with total turnover on the DSE dropping by 18% to Tk1,196 crore, compared to the previous day's Tk1,456 crore.

According to EBL Securities' daily market review, the market remained volatile throughout the day as participants remained active on both sides of the trading fence.

However, significant corrections in influential large-cap stocks eventually weighed down the indices, pulling the bourse into negative territory by the closing bell.

Sheltech Brokerage noted in its daily report that the market movement was primarily shaped by profit-taking after the recent advance. While the session opened with modest buying interest and several recovery attempts, selling pressure gradually became dominant through the mid-session.

It added that the volatility reflected a selective and cautious approach among investors, many of whom appear to be waiting for clearer signs of market stability before committing to large-scale fresh investments.

The market breadth remained bearish, with 240 issues declining against only 109 advancing, while 47 scrips remained unchanged on the DSE floor.

On the sectoral front, the textile sector emerged as the turnover leader, accounting for 19.4% of the day's total volume. This was followed by the banking sector at 12.4% and the general insurance sector at 11.7%.

In terms of returns, the miscellaneous sector faced the steepest decline of 4.1%, driven largely by a heavy sell-off in specific large-cap scrips. The banking and paper sectors also saw significant corrections of 1.5% and 1.4%, respectively.

In contrast, the services sector provided a rare bright spot with a 1.6% gain, while the textile and mutual fund sectors also managed to post marginal positive returns.

Among individual stocks, ICB Employees Provident Mutual Fund topped the gainers' list with a 10% price surge, followed by National Feed Mill, VFS Thread, and BD Thai Aluminium.

In terms of liquidity, Summit Alliance Port was the most traded stock with a turnover of Tk63.20 crore, followed by NCC Bank and IPDC Finance.

On the losing end, Beximco Limited hit the lower circuit breaker, shedding 9.98% of its value, while Midas Finance and Sunlife Insurance also featured among the top losers of the day.

The bearish sentiment was mirrored at the Chittagong Stock Exchange (CSE), where the Selective Categories' Index (CSCX) ended 83 points lower at 9,340.

The broad CASPI index at the port city bourse dropped by 123 points to settle at 15,271, while turnover declined by 27% to stand at Tk31 crore.

The first budget under the newly elected BNP government sets ambitious revenue targets that may prove difficult to achieve, given the country’s persistent constraints in tax collection and uneven progress in implementing reforms, according to Fitch Ratings.

In a report today, the ratings agency said the budget for financial year 2026-27 aims to raise the revenue-to-GDP ratio to 10.2 percent from around 8 percent in FY26. If achieved, it would mark Bangladesh’s highest ratio since 1993.
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Fitch said revenue collection would be the main test of the budget’s credibility. The government is targeting 18 percent nominal revenue growth year-on-year while planning to increase spending by 19 percent.

Measures proposed to boost collections include simplifying tax procedures, reducing tax exemptions, easing value-added tax compliance for small and medium-sized enterprises, and increasing non-tax revenue from state investments in state-owned enterprises, corporations and banks.

How the proposed budget reinforces an unequal tax structure
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How the proposed budget reinforces an unequal tax structure

While these initiatives could broaden the tax base over time, Fitch said weak implementation has limited the effectiveness of previous reform efforts.

The pressure to meet revenue targets is heightened by the government’s spending commitments. Social protection and related programmes account for 29.7 percent of total expenditure, while physical infrastructure makes up 18.7 percent, reflecting the government’s election pledges.

However, Bangladesh’s history of underspending could help contain the fiscal deficit if implementation again falls short of budget plans, said Fitch.

The rating agency said measures aimed at the energy sector could support medium-term growth if carried out effectively.

More than 40 percent of the country’s electricity generation capacity is gas-based, and the budget prioritises domestic gas exploration, efficiency improvements across generation and distribution, and stronger infrastructure to support liquefied natural gas supplies.

In the face of a global energy volatility triggered by the war in the Gulf, Bangladesh has requested a new programme from the International Monetary Fund (IMF).

Fitch noted that completing the final review of the current arrangement, which expires in January 2027, appeared unlikely.

It added that reaching agreement on a reform agenda could take time, meaning the credit implications of the FY27 budget would depend largely on whether the government could improve revenue mobilisation and investment execution.

The agency also questioned the government’s growth assumptions.

The authorities expect the economy to expand by 6.5 percent in FY27. Fitch, however, forecasts growth of 3.5 percent, citing continued fragility in the banking sector, weak private-sector credit growth, shortcomings in the policy framework and an uncertain external environment that continues to weigh on investment.

Fitch kept its FY27 fiscal deficit forecast unchanged at 3.6 percent of GDP, matching the government’s target. However, the agency said this reflects expectations of both lower revenue and lower expenditure than projected in the budget.

Fiscal performance in FY26 illustrated that pattern.

The revised deficit estimate for FY26 is reduced to 3.3 percent of GDP from the original 3.6 percent, supported by lower-than-expected spending disbursements. Revised revenue estimates are slightly above the budget target.

Fitch said this reduces the risk of near-term slippage on the headline deficit, but also underlines how difficult it may be to implement the FY27 budget in full.

Over the medium term, the agency said improvements in revenue collection and economic growth would depend on whether the government could deliver reforms more effectively than in the past.

New tax regime may hit middle class hardest
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New tax regime may hit middle class hardest

The authorities aim to raise the revenue-to-GDP ratio to 11 percent by FY30-FY31, increase total investment to 40 percent of GDP and lift foreign direct investment to 2.7 percent of GDP. These measures are intended to boost real GDP growth to 8.5 percent while bringing inflation down to 5 percent.

The budget includes several initiatives intended to support investment and export growth.

The government has reduced withholding tax on machinery rental payments to non-residents to 7.5 percent from 15 percent, highlighted bridge and expressway projects, and continued to promote public-private partnership initiatives.

It has also retained the 2.5 percent cash incentive for remittances sent through formal channels and extended duty-free import facilities and bank guarantees for raw materials and intermediate goods to encourage export diversification beyond the ready-made garment sector.