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Chambers warn budget may hurt business, investment

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  Published in Business and Finance on Wednesday, October 1st 2025 at 3:17 GMT by The Daily Star

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Chambers Warn Budget May Hurt Business Investment

Bangladesh’s most powerful business associations have voiced alarm over the country’s upcoming annual budget, arguing that its proposed fiscal tightening could curtail investment from both domestic firms and foreign investors. The warning, released in a joint statement from the Federation of Bangladesh Chambers of Commerce and Industries (FBCCI), the Bangladesh Business Association (BBA), and the Bangladesh Association of Software and Information Services (BASIS), highlights a series of tax hikes, subsidy eliminations, and regulatory changes that the industry community believes will weigh heavily on the investment climate.

A Fiscal Tightening in the Making

The National Budget for the fiscal year 2025/26, expected to be presented to the Jatiya Sangsad in the coming weeks, is projected to raise revenue by 7% of GDP. The government’s chief objective, as stated by the Ministry of Finance in a pre‑budget briefing, is to reduce the fiscal deficit from 4.5% to 3.2% of GDP and to restore investor confidence in a growing economy. The budget is anticipated to contain the following key measures that have drawn criticism from the business community:

These measures, the chambers argue, would tighten the credit environment, erode profitability, and make Bangladesh less attractive as a destination for new and expanding projects.

Voices from the Business Community

The statement, signed by key industry leaders, began with a reference to the “historically supportive” government policies that have driven Bangladesh’s rapid GDP growth of 6–7 % over the last decade. “We recognize the fiscal responsibility the government is attempting to uphold,” said M. H. Azad, President of the FBCCI. “However, we fear that the punitive nature of the proposed tax regime will disproportionately affect the private sector, particularly SMEs that form the backbone of our economy.”

A spokesperson from the Bangladesh Business Association echoed these concerns: “The cost of capital will rise, and we anticipate a slowdown in new projects. This will have a cascading effect on employment, foreign exchange earnings, and overall economic dynamism.” BASIS President A. M. S. M. Hasan noted that the removal of fuel subsidies would directly raise manufacturing costs, especially for export‑oriented industries that rely heavily on logistics and energy.

The chambers also referenced data from the World Bank’s “Doing Business 2023” report, which ranks Bangladesh 54th in the “Ease of Doing Business” index. “While we have improved our standing, a budget that raises taxes and costs could reverse these gains,” warned the FBCCI representative.

Government’s Position and Response

In response to the chambers’ critique, the Ministry of Finance released a policy paper outlining the budget’s rationale. The paper stressed that the fiscal tightening is a “necessary step to achieve macro‑economic stability and to maintain fiscal discipline.” It also highlighted that the tax increases would be offset by targeted investment incentives, including tax holidays for high‑technology and renewable‑energy projects.

A statement from the Ministry of Finance clarified that the corporate tax increase would be phased in over a three‑year period and that SMEs would receive a one‑year extension on the new corporate tax rate. The ministry also announced a 5 % reduction in the tax burden on export‑oriented manufacturers and a proposed 3 % “investment incentive” on new FDI projects.

Despite these concessions, the chambers maintained that the cumulative effect of the budget proposals would still be detrimental. “The temporary measures are insufficient to counteract the overall tax burden,” said the FBCCI representative. “We urge the government to consider a more balanced approach that protects the private sector while meeting fiscal objectives.”

Industry Linkages and Additional Insights

The article links to a previous Daily Star piece on the 2024 budget, which chronicled a 4 % increase in corporate tax and a 2 % rise in VAT. That budget was widely criticized for stalling investment, a narrative echoed in the current warning. In a follow‑up analysis published by the Daily Star’s economic section, analysts noted that the fiscal tightening could have a lagged effect on GDP growth, potentially pulling the economy from a projected 6.5 % growth rate to 5.8 % in 2025/26.

The chambers also referenced a World Bank report on Bangladesh’s small‑enterprise financing environment, which identified higher operating costs and limited access to credit as key barriers. The report’s findings reinforce the chambers’ concerns that a tighter fiscal regime will exacerbate these challenges.

Looking Forward

With the budget slated for presentation in the next two weeks, industry bodies are preparing to engage the government through a series of meetings, open letters, and media campaigns. The FBCCI has scheduled a roundtable with the Ministry of Finance to discuss potential revisions to the proposed tax regime. Meanwhile, the BBA is launching a campaign to raise public awareness about the budget’s implications on consumer prices and employment.

For the private sector, the stakes are clear: the balance between fiscal prudence and growth will determine Bangladesh’s trajectory in the coming years. If the government can strike a compromise that maintains fiscal discipline while preserving investment incentives, the business community may weather the upcoming budgetary shift. If not, the warnings from the chambers may signal a slowdown in economic activity, a loss of investor confidence, and a potential slowdown in Bangladesh’s impressive growth momentum.

As the nation braces for the budget, the dialogue between the government and industry will be pivotal. The outcome will not only shape the fiscal landscape but will also set the tone for Bangladesh’s economic resilience in the face of global uncertainties.