Bangladesh's National

Budget Review: The Initial

Stride towards a 'Smart'
Bangladesh

FY - 2023-24

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 Budget Highlights

GDP Target Inflation Target Budget Size Revenue Target Budget Deficit

7.5% 6.0% 7.6 trillion 5.0 trillion 2.6 trillion

15.3% YoY Growth

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 Executive Summary

● The government has announced a robust BDT 7.62 trillion budget ● The government, despite a high revenue target, has
for FY 2023-24, representing a substantial increase of 15.3% decided not to change the corporate tax structure and
compared to the revised budget of FY 2022-23. This signals a maintain the status quo.
determined push towards stimulating economic growth amidst
challenging global circumstances. The budget amounts to ● It has proposed measures to lessen the tax burden on
approximately 15.2% of the projected nominal GDP of BDT 50.0 individuals, such as increasing the tax-free income
trillion, a significant portion of national income. threshold and raising the surcharge limit on net worth to
BDT 4cr from BDT 3cr. But imposition of the minimum
● The government’s revenue target is set ambitiously at BDT 5.0 charge of Tk 2,000 on individuals whose earnings fall
trillion, with the lion's share of BDT 4.3 trillion anticipated from below the taxable income to receive 38 service is
NBR tax collections. Achieving these revenue targets will questionable.
undoubtedly be challenging but will also be crucial for funding the
ambitious budget plan. ● There are no provisions in the FY 2023-24 budget for
whitening undisclosed money through the stock
● In light of the budgetary deficit, the government plans to resort to market, possibly due to past failures.
a sizable BDT 1,234 billion borrowing from the banking sector and
an additional BDT 230.0 billion through national savings ● The budget aims to boost economic growth while
certificates. However, this increase in government borrowing could managing fiscal duties, but its effectiveness depends on
potentially put upward pressure on interest rates, constricting achieving revenue targets and proper public debt
liquidity in the money market. Such a scenario could inadvertently management.
slow private sector credit growth and drive up the yield on treasury
bonds, causing concerns for private investment.

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 Major Challenges
● The planned expansion of the budget deficit in the FY24
budget could exacerbate macroeconomic stress. The deficit,
projected at Tk2.60 lakh crore, is 15% higher than the revised
FY23 budget deficit.

● This expansionary fiscal stance may pose challenges in

achieving the goals of disinflation, easing external
imbalances, and promoting investment-driven growth.

● Monetizing government borrowing could lead to inflation

and worsen the impact of higher indirect taxes on prices.

● Relying more on commercial banks for financing risks

crowding out private credit and affect growth.

● Maintaining stability in the exchange rate of taka and

keeping foreign exchange reserves at a comfortable level.

● The government needs to create fiscal space for sustainable

social spending and public investment while considering the
risks associated with increased deficit financing.

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 Budget At a Glance, BDT bn
Revised YoY Growth Revised YoY Growth
Revenue FY’2023-24 Expenditure FY’2023-24
FY’2022-23 in % FY’2022-23 in %

NBR Tax 3,700.0 4,300.0 16.2% Non-Development 4,142.8 4,752.8 14.7%

Non-NBR Tax 180.0 200.0 11.1% Development 2,416.1 2,775.8 14.9%

Non Tax Receipts 482.6 539.0 11.7% Others 46.2 89.2 93.2%

Total 4,362.6 5,039.0 15.5% Total 6,605.1 7,617.9 15.3%

Revised YoY Growth

Budget Deficit FY’2023-24
FY’2022-23 in %

External Sources 770.2 1,024.9 33.1%

Domestic Sources 1,242.9 1,554.0 25.0%

Bank Borrowing 872.9 1,324.0 51.7%

Non-bank Borrowing 370.0 230.0 -37.8%

Total 2,013.1 2,578.9 28.1%

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 Budget At a Glance
● The government has announced a budget of BDT 7.62 trillion for FY
2023-24, marking a 15.3% rise from the revised budget of FY 2022-23
and equivalent to 15.2% of the targeted nominal GDP of BDT 50.0
trillion.
● In an effort to balance fiscal stability with infrastructure development,
the budget prioritizes operational expenditures (62.4%), with a
substantial commitment towards developmental expenditure (36.4%).
The remaining 1.2% is allocated towards sundry expenses.

● The set revenue target is BDT 5.0 trillion, with a substantial chunk of
BDT 4.3 trillion projected to be amassed from NBR tax. However, the
elevated reliance on NBR tax could potentially exacerbate the budget
deficit, as evidenced in the first 10 months of FY 2022-23, where NBR
collected BDT 2.50 trillion, falling short of the BDT 3.7 trillion target.

● The total budget deficit is estimated at BDT 2,579 billion, with the
government planning to source BDT 1,025 billion from foreign avenues
and BDT 1,554 billion domestically.

● Notably, to address the budget deficit, there's a stronger leaning

towards bank borrowing. The FY'24 bank borrowing target stands at
BDT 1,324 billion, a significant 51% increase from the revised FY'23
target, while the national savings certificate borrowing target is scaled
back to BDT 230 billion from BDT 250 billion.

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 GDP Growth Rate Target
● Bangladesh is ambitiously aiming for a 7.5% GDP
growth, an objective set to amplify its historically
strong growth pattern. The country has shown
noteworthy resilience amidst the COVID-19 crisis and is
ready to leverage the expansion of its economy along
with its improving stance in global economic
standings. This plan underscores Bangladesh's
capacity for maintaining robust economic growth, Historical Budget Growth in Bangladesh
making it a compelling prospect on the global stage.

● In the last 10 years, the average GDP growth in

Bangladesh was around 6.8%.

● In the previous year’s budget declaration, the

government targeted 7.20% GDP growth which has
been revised to 6.03%.

● The inflation target for the fiscal year 2023-2024 is set

at 6.0% which looks highly ambitious considering
current economic conditions.

● As of April 2023, 12-month average inflation reached at

8.64% against targeted 5.64%.

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Sectoral Allocation of Budget
**All numbers are in BDT bn

Transportation & Communication Interest

861 (11.3% of Total Budget) 945 (12.4% of Total Budget)

Public Administration Education & Technology

556 (7.3% of Total Budget) 1,044 (13.7% of Total Budget)

Housing Local & Rural Development

76 (1.0% of Total Budget) 495 (6.5% of Total Budget)

Health Defence
381 (5.0% of Total Budget) 350 (4.6% of Total Budget)

Public Order & Safety Social Security & Welfare

312 (4.1% of Total Budget) 350 (4.6% of Total Budget)

Agriculture Energy & Power

267 (3.5% of Total Budget) 348 (4.6% of Total Budget)

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 Tax Free Income Threshold For Individual Taxpayers

Existing: Existing:
3.5 lacs General Taxpayer 4.5 lacs

Proposed: Proposed:
4 lacs 4.75 lacs

Women & Senior

Physically
Citizen (65+)
Challenged

Existing:
Existing: 3 lacs Existing:
3.5 lacs 4.75 lacs
Proposed:
Proposed: 3.5 lacs Proposed:
4.75 lacs 5 lacs
Third Gender War-wounded gazette
freedom fighters

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 Tax Slab on Income

Existing Proposed
On the First
Tk. 3,50,000 Nil Nil
On next
Tk. 1,00,000 10% 5%
On next
Tk. 3,00,000 15% 10%
On next
Tk. 4,00,000 20% 15%

On next
25% 20%
Tk. 5,00,000

On the balance of total income 30% 25%

**Proposed minimum BDT 2,000 tax among competent people who are below taxable income but has obligation to submit income tax return

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 Surcharge for Individuals :

On next: On Next:
Existing Up to 2500 cc or Up to 3000 cc or
120 KW car -BDT 150 KW car -BDT
On the First
75,000 150,000
Tk. 40 mn Nil
On next
On next: On Next:
Tk. 40(+) to 100(-) mn 10% Up to 3500 cc
Up to 2000 cc or
On next 100 KW car or 175 KW car
Tk. 100(+) to 200(-) mn -BDT 50,000 -BDT
20% 200,000
On next
Tk. 200(+) to 500(-) mn 30% Up to 1500 cc or Above 3500 cc
On next 75 KW car -BDT or 175 KW car
35% 25,000 -BDT 350,000
Above Tk. 500 mn
Environmental
On net worth Surcharge

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 Corporate Tax Remained Unchanged

Publicly Traded Company: Publicly Traded Tobacco

Publicly Traded
Bank, NBFI & Mobile Operator Manufacturer
Issues Shares More Than 10% of Its Paid-Up Capital Through IPO
Insurance
20.0%
Proposed:
Proposed: Proposed:
If fails to meet the condition** 40.0%
37.5% 45.0%
22.5%

Issues Shares More Than 10% of Its Paid-Up Capital Through IPO
20.0%
Non-Publicly Traded Non Publicly Traded
If fails to meet the condition** Bank, NBFI & Mobile Operator
22.5% Insurance
Proposed:
Proposed:
Non-Publicly Traded Company: 45.0%
40.0% Merchant Bank
If comply with condition:
37.5%
Proposed:
If fails to meet the condition** 37.5%
37.5%
**Condition: All receipts and income must be transacted through bank transfer and every single transaction above BDT 5 lakhs and annual investment over BDT 36
lakhs of expense
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 There is No Direct Implication For The Capital
Market in FY’24 Budget

The unchanged corporate tax status

Corporate tax remained
quo ensures that listed companies will
unchanged
remain unaffected

No further instruction
about tax rebates in capital Prior to the budget, speculation was rife that
market investment the government might eliminate tax breaks
on secondary market investments. The current
lack of official guidelines implies that tax
incentives for the capital market may persist.
Listed Companies must
float more than 10% of its
paid-up capital to get tax
benefit
The national budget brought no respite for
bearish stock market investors, maintaining
In case of Failure to meet last year's reduced tax gap between listed and
the above conditions, Tax non-listed companies
Rate will be 25%

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 Price Up Price Down

Mobile Phones Plastic kitchenware, Raw material: Diaper

tableware
Land Raw material: Sanitary napkins
Spectacles (glass)
Imported agricultural machinery
Apartments Pen
Imported fish, poultry feed
LPG Cylinder Micro-oven
Imported airplane parts
Beverages Cement
Sweets
Software (imported) Bicycle Handmade biscuit

Lift Cashew nut Cake

Escalator Luxury car Locally-made juicer

Cigarettes Tissue paper

Pesticide
E-cigarettes Basmati rice Spray machine
Raw material:
Gold
Soap & Shampoo

Dates

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 Sector Wise
Implication of
Budget
FY’2023-24

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 Minimum Price of all Segment Segment
Existing
Price (10
Proposed
Price (10
Existing
Proposed
(Tobacco Supplementary
Cigarettes is Re-fixed Products)
Sticks), Sticks),
Duty (SD)
SD
BDT BDT

01. Tax
No change is made in the corporate Tax Rate
Lower Slab 40 45 57% 58%
(45%) and Surcharge (2.5%) for the tobacco
Medium Slab 65 67 65% 65%
industries.

02. Price change and SD

Government proposed to increase the minimum
Higher Slab 111 113 65% 65%

Premium Slab 142 150 65% 65%

price of 10 sticks of low tier cigarettes to BDT 45,
Medium tier to BDT 67, Higher Tier to BDT 113 and Existing Existing
Segment Proposed Proposed
Price Supplementary
premium tier to BDT 150. Supplementary duty for all (Bidi) Price, BDT SD
(BDT) Duty (SD)
segments are kept unchanged except lower slab.
20-Sticks
19 19 40% 40%
(Filter)
Electronic cigarettes
03. CD has been increased from 5% to 25% &
10-Sticks
(Filter)
10 10 40% 40%
SD has been increased from 0% to 100%
25-Sticks
Company: 18 18 30% 30%
(Non- Filter)
Since tobacco products are comparatively price-inelastic, increasing
price would not reduce the consumption. Revenue will go up in line
12-Sticks 9 9 30% 30%
with price increase but net revenue of the tobacco manufacturer
(BATBC) is expected to go down with increasing SD in lower
segment.. 8-Sticks 6 6 30% 30%

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 Pharmaceuticals Sector

01. Anti-malarial and anti-tuberculosis drugs

propose exemption of VAT at the production stage on anti-malarial
and anti-tuberculosis drugs

02. Cancer medicines

To make the treatment of cancer patients more affordable, one
hundred more raw materials of cancer medicines in the existing
notification.

03. Diabetic
diabetic management related drugs locally, I propose to include
three more raw materials in the existing notification.

IV Cannula
04. Propose to allow import of main raw materials of IV Cannula at
concessionary rate

Companies

Positively impacted: SQURPHARMA, BXPHARMA, BEACONPHARMA, ACMELAB, IBNSINA,

NAVANAPHARMA and for hospital requisite JHRML

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 IT Sector

01. Software
• Govt. propose to impose 5 percent VAT on software production and
customization services &
• 25% customs duty and 15% VAT on the import of software

02. Mobile Phone

Govt. proposed to impose following VAT
• impose 7.5 percent VAT instead of 5 percent,
• 2 percent instead of 0 (zero) percent power circuit boards (PCB)
assembling and mobile housing manufacturing, &
• 5 percent instead of 3 on SMT assembly process and battery
charger assembly respectively

Optical Fiber
03. Exemption of VAT in excess of 5 (five) percent at the production stage
on “optical fiber cable”

Companies:

• The cost of software from AAMRATECH, DAFODILCOM, and eGeneration is set to rise,
• the government's overall digitalization goal and impinging on new client acquisition
for MNOs like GP and ROBI.
• Conversely, ISP businesses such as ADNTEL, BDCOM, and AAMANET could see positive
impacts.

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 Electronic Appliances Sector
Refrigerator and freezers
01. Extension of existing VAT exemption facility for production of
refrigerator and freezers till June 30, 2024
Washing Machine, Microwave Oven
02. Extension of existing VAT exemption facility for production of Washing
Machine, Microwave Oven, Electric Oven till June 30, 2025;
Blender, Juicer
03. Extension of existing VAT exemption facility for production of Blender,
Juicer, Mixer, Grinder, Electric Kettle, Multi Cooker and Pressure
Cooker till June 30, 2025;

Electronic accesories

04. Extension of existing VAT exemption facility for production of Computer

Printers, Computers, Laptops, Notebooks, Notepads, Tabs, and mobile
accessories till June 30, 2026;
Lift & escalators
05. Propose to increase the existing Customs Duty to 15% on Lift and skip
hoists from 5%
Govt. propose to increase the existing customs duty for from 1% to
15%.

Companies

WALTONHIL & SINGERBD are going to be positively impacted

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 Housing & Construction Sector

01. Cement
Govt. proposed to increase the existing specific rate of duty of cement
clinker from 500 taka to 700 taka per m.ton.

Moreover, Importers of Limestone as well as Dolomite are subjected to

supplementary duty

02. Hot rolled steel & Cold rolled steel

Reduce the VAT from 15% to 5% on Terephthalic acid, Ethylene glycol, hot
rolled stainless steel in coil used as raw materials of industry etc.

03. Land Registration

To increase the tax rate at source rationally during land registration in
areas under and outside the jurisdiction of Rajuk and CDA;

Companies

Cement: Heidelberg, Crown cement, Premier Cement and Meghna Cement will be
negatively impacted

Steel: BSRMLTD,BSRMSTEEL,RSRM, SSTEEL will be positively impacted

Real Estate: EHL might be negatively impacted

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 FMCG

01. Biscuits & Cakes

Propose to raise the existing exemption limit for “Handmade
Biscuits” to Tk.200 per kg from Tk.150 and for “Cakes (excluding
Party Cake)” to Tk.300 per kg from Tk.250

02. Sweetmeat
to reduce the existing 15 percent tax rate to 7.5 percent in
order to realize the desired revenue from sweetmeat shop
service

03. Coconut/Copra Waste

Propose exemption from VAT on Coconut/Copra Waste at
manufacturing stage which is used as animal feed.

Cosmetics and Soap

04. Import duty on cosmetics, including soaps, organic surface-active
agents, bar cakes, and soap-making ingredients, will increase from
3% to 20%, leading to higher prices for these imported products

Companies

Olympic, Marico, RECKITTBEN will be positively impacted.

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 Automobile Sector

01. Bicycles
propose to increase the customs duty from 10% to 15% on
the import free-wheel sprocket-wheels of bicycles

02. Electric Motor Manufacturing

Proposal to create two new HS codes for electric motor parts to allow the
local industry to import them at a reduced rate

03. Motorcycle
Proposal to amend the import notification for raw materials used in
local motorcycle production to address complications encountered
during the import process.

04 Multiple Vehicles
propose to impose various cc or kilowatt-based environmental
surcharges on multiple vehicles

Companies

RUNNERAUTO, ACI undefined impact

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 Financial Sector

01. Digital Bank

BB is expecting to launch a digital bank.

02. Credit Rating Systems

developing a machine learning and artificial intelligence
(AI)-based credit rating system

03. MFS
steps to reduce cash out charges and increase transaction
limits in the development of the MFS system

Cashless Society
04. rate of cash usage is expected to reduce by 75 percent in
the next four years

Companies
BANKASIA, BRACBANK, The CITY BANK, Dhaka Bank, UCBL will be positively
impacted.

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 Textile & Export-Oriented Sectors

01. Man Made Fabrics

Government proposes VAT exemption on manufacturing stage for "cut
fabrics and waste pieces (not exceeding one meter in length)", "fabrics
supplied free of cost as samples to the Bangladesh Standards and
Testing Institution (size below three square meters)", and "Taps and
Braids" made of man-made fabric.

Companies

MATINSPINN is expected to have positive effect.

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 Miscellaneous Sectors

01. 15 percent VAT on ball point pen at the manufacturing stage

GQBALLPEN is expected to benegative impacted

02. 5 percent VAT at the local manufacturing stage on poly propylene

staple fiber
KBPPWBIL, YPL are expected to be negatively
impacted

7.5 percent VAT instead of existing 5 percent VAT at local

03. manufacturing stage on iron or steel (LPG Cylinder)
MJLBD, EPGL & INTRACO are expected to be negatively impacted

The proposed budget for FY 2023-24 increases VAT from 5% to 7.5% on

04. various tissue and towel products.
BPML is expected to be negative impacted

VAT increase from 5.0% to 7.5% on all types of plastic tableware,

kitchenware, household articles, hygiene and toilet articles(except tiffin
05. box & water bottles)
NPOLYMER is expected to be negatively impacted

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 Miscellaneous Sectors

Propose to reduce the total tax incidence on all types of

06. containers where customs duty rate will be only 15%
SAIFPOWER is expected to be positively impacted

VAT increase from 5.0% to7.5% on aluminum and kitchen or

07. other household articles, sanitaryware and aluminum parts

RAKCERAMIC and NAHEECAP is expected to be negatively impact

To provide concessional facilities to the manufacturers of LED

lamps/energy saving lamps etc.
08. BDLAMPS is expected to be positively impact

Proposal to withdraw duty tax exemption for importing

materials in the hotel industry in Bangladesh to protect
09. revenue.

UNIQUEHRL& SEAPERAL are expected to be positively impacted

Exempt Advance Tax on import of the Rice transplanters,

10. dryers, all types of sprayer machines, potato planters used in

agriculture

MONNOAGML, ACI are expected to be positively impacted

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Contact
Data Source: Ministry of Finance City Bank Capital

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Dhaka – 1208,
Nahid Hasan Research Analyst 01681 433 976 nahid@cbcrl.com Bangladesh

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