Could this budget set the groundwork for a trillion-dollar economy?

Every country that has gone through a serious economic transformation will cite a defining budget, not because of the size of expenditure or the number of projects announced within it, but because the budget was one that introduced a new economic direction.

Bangladesh may be approaching such a moment. Finance Minister Amir Khasru Mahmud Chowdhury has repeatedly framed the country’s economic future around the ambition of building a trillion-dollar economy within the next decade. The government’s newly approved five-year strategic framework outlines investment-led growth, universal social protection, institutional reform, and increasing domestic revenue through digitisation and deeper integration across the economy. So, if done and followed up properly, the upcoming FY2026-27 budget could set the foundations for that long-term ambition of becoming a trillion-dollar economy.

Of course, Bangladesh is entering this budget cycle under significant pressure. Growth has slowed, inflation poses difficulty for ordinary people, the banking sector is under strain, and the country’s tax-to-GDP ratio remains among the lowest in the world. At the same time, the government is trying to attract investment, stabilise markets, expand social protection, and prepare for a more competitive global trade environment.

But one important shift has already happened. The discussion around this budget is not only about austerity, subsidies, or borrowing from institutions like the IMF, World Bank, or ADB. There is now a growing discussion around how Bangladesh can raise its own revenue more intelligently, formalise more of its economy, and use technology to increase state capacity.

For decades, Bangladesh’s fiscal conversation has remained relatively narrow. Whenever the government has needed resources, the discussion usually revolved around foreign loans, donor support, increasing taxes, and/or cutting expenditure. But there are other ways to think about revenue.

Many countries are now using instruments like diaspora bonds and green bonds to mobilise capital from citizens and investors who want to contribute to long-term national projects. Bangladesh has a large overseas population and increasing international interest in climate-linked financing. These are areas that deserve exploration.

At the same time, the government also needs to rethink how it delivers public services. One of the more practical ideas is expanding premium or express government services across multiple sectors. Bangladesh already has examples of this. In the passport system, citizens can pay higher fees for faster delivery. In many cases, people are willing to pay more for quick and reliable service. This not only increases government revenue without raising tax rates, it also reduces dependency on middlemen and, therefore, reduces corruption. A citizen who can legally pay for a faster passport service is less likely to rely on brokers or unofficial payments. The same logic could potentially be expanded to services related to driving licences, vehicle registration, birth certificates, land records, and more.

The cost to the government of processing many of these services often remains relatively similar. But if even some percentage of the population chooses premium processing, the government’s revenue could increase significantly while simultaneously improving public experience.

The biggest long-term opportunity, however, may lie in Bangladesh’s growing digital public infrastructure.

Over the past decade, Bangladesh has quietly built many of the building blocks needed for a modern interoperable payment ecosystem. Mobile financial services are now used by millions of people. Bangla QR has already been introduced. National ID infrastructure exists. Interoperability among financial systems has also improved. But these systems still largely operate in fragments.

Countries like India have demonstrated what is possible when payment systems, identity systems, and tax systems begin communicating with each other through a unified structure. India’s UPI transformed not only digital transactions, but also the country’s visibility over economic activity.

The deeper issue in Bangladesh’s tax system is that much of the economy remains outside the visible formal system. The government cannot dramatically increase tax rates overnight. But it can increase revenue, guided by a better understanding where economic activity is happening. If systems like the NID, payment gateways, banking infrastructure, and tax databases become more integrated, institutions like the National Board of Revenue (NBR) would gain far better visibility into money flows, transaction patterns, and economic activity. Over time, this would make tax monitoring and collection more efficient, without a reliance on aggressive enforcement.

Even small transaction fees on massive digital payment volumes can generate meaningful revenue. More importantly, the data generated through these systems can gradually expand the formal economy itself.

Currently, a huge portion of Bangladesh’s economy operates outside formal taxation and institutional support. Small restaurants, food carts, neighbourhood grocery shops, roadside businesses, workshops, and thousands of small family-run enterprises generate real income and real economic activity, yet many remain entirely outside the formal system. This also creates an imbalance as, for example, a salaried employee earning Tk 30,000 per month may end up paying taxes through formal deductions, while a profitable small business operating entirely in cash may contribute nothing to the tax system.

But formalising the informal economy cannot be achieved through punishment alone. The transition has to be designed as an incentive-based structure.

One possible approach could be introducing simplified flat-rate taxation for small informal businesses based on category and size. Instead of complex compliance requirements, a small grocery shop, food stall, or neighbourhood restaurant could pay a modest fixed monthly amount depending on their turnover. The key, however, is that taxation must come with benefits. If a small business owner formally registers and pays a simple flat tax, they should also become eligible for incentives like microcredit, working capital loans, social protection benefits, and/or simplified licensing. Even a relatively modest loan can help restock products, maintain cash flow, and reduce dependency on informal lenders. This is how formalisation can be made attractive to those operating within the informal economy.

The government already appears to be moving towards more inclusive welfare mechanisms through initiatives like the Family Card. Expanding these systems while linking them gradually to financial inclusion and digital infrastructure could help create a more integrated social protection framework.

The upcoming budget also carries political significance as it may help define the economic narrative of the current government’s early period. That narrative should not only focus on macroeconomic stability or headline growth numbers. It should focus on inclusion. For the first time in many years, there is visible discussion around bringing previously excluded populations into formal economic systems, expanding social protection in more structured ways, and using technology not simply for digitisation, but also for increasing institutional capacity.

That does not mean the challenges are small. Global uncertainty remains significant. Energy markets are volatile. Trade pressures continue. The banking sector still requires deep reform. Institutional execution capacity also remains uneven. And the question of prospective LDC graduation itself is uncertain and evolving. But it is precisely because of these pressures that Bangladesh needs a budget that is planned structurally rather than temporarily.

The country’s long-term ambition of becoming a trillion-dollar economy will not be achieved atop isolated mega projects alone. It will require expanding the formal economy, increasing government revenue intelligently, improving state services, strengthening financial infrastructure, and building trust between citizens and institutions. That is what makes this budget important. It can signal whether Bangladesh is ready to begin constructing the systems required for this next phase in its economy.

Ashfaq Zaman is founder of Dhaka Forum and a strategic international affairs expert.

Views expressed in this article are the author's own. 

Follow The Daily Star Opinion on Facebook for the latest opinions, commentaries, and analyses by experts and professionals. To contribute your article or letter to The Daily Star Opinion, see our guidelines for submission.