FY2020-21 Bangladesh National Budget Overview
The Bangladesh FY2020-21 budget period (July 2020 to June 2021) was fixed at BDT 5.68 trillion (about $67B), a 13.3 percent increase from the previous year. It represented 17.9 percent of GDP, reflecting a large-scale emergency response to the COVID-19 pandemic. Revenue targets were BDT 3.78 trillion ($45B), but collections are projected to reach only 75 to 80 percent of the target, while the fiscal deficit reached 6.0 percent of GDP, placing it at the highest level ever recorded.
The core feature of the budget was the inclusion of a COVID-19 economic support package totaling BDT 1.21 trillion ($14.3B, 4.3 percent of GDP). Industrial support (interest subsidies on working-capital financing), social safety nets (cash transfers and food distribution), healthcare (testing, treatment, and vaccination), and export industries (RMG worker wage support) were the four main pillars. On tax policy, corporate income tax cuts (listed firms: 25% to 22.5%, private firms: 35% to 32.5%), VAT simplification, and broader personal income tax exemptions improved the business environment. For Korean firms this created positive effects through corporate tax cuts, export incentive continuity, and SEZ tax benefits.
Revenue and Expenditure Structure
On the revenue side, NBR tax collection reached BDT 3.30T, or 87 percent of total revenue. VAT (37 percent), income tax (30 percent), tariffs (12 percent), and supplemental duties (8 percent) were the major tax items. VAT has been under a single 15 percent rate since the 2019 VAT Act revision, with extensive exemptions for small firms, agriculture, and education. On the expenditure side, current spending accounted for 60 percent, development expenditure (ADP) 36 percent, and other spending 4 percent. ADP of BDT 2.05T was focused on transport, power, education, and healthcare infrastructure, with the largest projects being the MRT line, the Padma bridge, and the Rooppur nuclear plant. Debt servicing represented 12 percent of expenditure, so fiscal sustainability remains a key challenge. External borrowing (EDCF, WB, ADB) remains the core source for development funding.
| Item | Amount (BDT B) | GDP % | Share % | YoY | Notes | Challenge |
|---|---|---|---|---|---|---|
| Revenue-NBR tax | 3,300 | 10.4% | 87% | +12% | VAT, income tax, customs | Collections |
| Revenue-Non-NBR | 150 | 0.5% | 4% | +5% | Fees and taxes | Scale-up needed |
| Revenue-Non-tax | 350 | 1.1% | 9% | +8% | SOE dividends | Volatile |
| Expenditure-Recurrent | 3,410 | 10.7% | 60% | +11% | Wages, debt, subsidies | Rigid base |
| Expenditure-ADP | 2,050 | 6.5% | 36% | +8% | Infrastructure development | Execution around 80% |
| Expenditure-Other | 220 | 0.7% | 4% | +15% | Emergency COVID | One-off |
| Fiscal Deficit | 1,900 | 6.0% | — | +2.0%p | Record high | Bond issuance and borrowing |
Tax Reform and Corporate Environment
FY2020-21 tax adjustments were designed to improve corporate competitiveness. The uniform 2.5 percentage point corporate tax reduction was a clear signal to attract foreign direct investment. For Korean investors, especially unlisted entities, the effective tax burden dropped to 32.5 percent. SEZ and economic zone investors (BEZA, BEPZA) could obtain up to a 10-year corporate tax holiday, plus duty and VAT exemptions. The 12 percent RMG corporate rate benefits Korean textile firms, while export-input tariffs of 0 to 5 percent and a cash incentive of up to 20 percent strengthened export competitiveness. On the other hand, supplementary duties of 20 to 100 percent applied to consumer and luxury goods create non-tariff-like barriers to Korean consumer exports.
Implications for Korean Companies and COVID Response
The FY2020-21 budget made COVID response and economic recovery Bangladeshs top policy priority. A BDT 1.21T ($14.3B) stimulus package, a 2.5 percent-point corporate income tax reduction, and BDT 2.05T in ADP infrastructure spending were core pillars, with fiscal deficit widened to 6.0 percent of GDP. For Korean firms, the budget generated four major benefits: tax reduction, SEZ exemptions, export incentives, and access to EDCF-backed infrastructure projects. For firms in the Mirsarai Korean zone, this can reduce the effective burden below 5 percent. Broadening the tax base and rationalizing subsidies remain central to medium-term fiscal sustainability, while digital tax and customs technology exports from Korea offer additional collaboration opportunities.