Bangladesh’s proposed FY2026-27 budget retains a tariff and protection structure that is inconsistent with its stated ambitions for export diversification, competitiveness and a managed transition following graduation from least developed country (LDC) status, Policy Research Institute of Bangladesh (PRI) Chairman Zaidi Sattar said on Wednesday in Dhaka.
Speaking at a post-budget dialogue organised by the Metropolitan Chamber of Commerce and Industry, Dhaka (MCCI), Standard Chartered Bangladesh (SCB) and PRI, Sattar said the economy is at a “1991 moment”, requiring a decisive shift in policy direction similar to the earlier transition from an import-substitution model to an export-oriented growth strategy that underpinned decades of expansion and poverty reduction.
The economist argued that while the budget speech identifies structural constraints including export concentration, weak diversification, tariff and non-tariff barriers, customs inefficiencies, standards bottlenecks and the need for free trade agreements, the policy response does not yet amount to a coherent trade reform package.
Core instruments required for post-LDC adjustment remain underdeveloped or absent, including tariff rationalisation, reduction of para-tariffs—additional taxes and charges imposed on imports beyond standard customs duty—elimination of anti-export bias, expansion of bonded warehouse access for exporters, faster value-added tax refund systems and WTO-consistent export-support mechanisms.
Implementation of the National Tariff Policy 2023 is also not reflected in the budget direction, he added.
According to PRI, Bangladesh’s average nominal protection rate will stand at 27.81 per cent in FY2026-27, compared with 29.24 per cent in FY2000.
Average customs duty is projected at 14.66 per cent and para-tariffs at 13.15 per cent, resulting in an average total tax incidence on imports of 55.38 per cent, up from 50.85 per cent in 2000.
Sattar cited the figures to argue that the structure of protection has remained broadly stable over time despite repeated reform discussions.
He highlighted a persistent imbalance in tariff composition as a key concern. Average output tariffs on consumer goods stand at 42.24 per cent in FY2027, compared with 17.16 per cent on raw materials, intermediate inputs and capital machinery. This gap continues to reinforce an anti-export bias by making production for the domestic market more attractive than export-oriented manufacturing.
Regulatory measures are reinforcing the same pattern. Regulatory duties have been increased rather than phased out, WTO-inconsistent minimum import values have been reinstated and there is no clear roadmap for reducing protective supplementary duties.
The resulting tariff regime is increasingly complex and inconsistent with the stated objective of lowering the cost of doing business and improving trade facilitation.
Sectoral protection for selected consumer industries continues without clear conditions for transition, with no indication of time-bound or performance-based frameworks that would require firms to graduate from protection over time.
Without such conditions, prolonged protection risks entrenching inefficiency while sustaining elevated consumer prices, reinforcing Bangladesh’s position as a high-cost consumer market.
Consumer welfare remains insufficiently reflected in tariff policy outcomes despite its broader macroeconomic implications.
Institutionally, trade policy formally falls under the Ministry of Commerce, but import taxation is largely driven by the National Board of Revenue (NBR), which continues to treat tariffs primarily as a revenue instrument rather than a competitiveness constraint. This creates a structural bias in policy design.
A comprehensive overhaul of the NBR’s legal, structural, technological and governance framework is required to align revenue administration with an export-oriented growth model.
A credible LDC graduation strategy would require faster reforms in duty drawback systems, duty-free bonded warehouse access for exporters, remission of embedded taxes on exports, strengthened standards and testing infrastructure, logistics improvements and deeper market-access diplomacy.
Exchange-rate flexibility and improved remittance formalisation would also be important supporting elements for export competitiveness.
The budget provides macroeconomic stabilisation and policy continuity, but it falls short of the deeper trade-policy transformation required to sustain higher growth and ensure a successful transition beyond LDC status, Zaidi Sattar added.
