Failure to meet revenue targets may fuel inflation: CPD

The Centre for Policy Dialogue (CPD) on Thursday warned that failure to achieve the government's ambitious revenue targets could stoke inflation and complicate macroeconomic management. 

Reacting to the proposed FY27 budget, CPD Executive Director Fahmida Khatun said the fiscal plan rightly emphasises economic stability, institutional reform and investment-led growth, with elements of economic democratisation, employment generation and improved governance reflected in the overall framework.

However, she highlighted persistent weaknesses in revenue mobilisation. 

Despite ambitious annual targets, actual collections have consistently fallen short. 

Revenue growth during the first nine months of FY26 stood at just 6.9%, meaning collections would need to surge by an extraordinary 84.6% in the final quarter to meet the current year's target – a prospect she described as highly challenging.

The proposed revenue target of Tk6.95 lakh crore for FY27 represents a further significant jump.

"If revenue targets are not met, it will create a conflict between monetary and fiscal policy, as the government will have to rely more on bank borrowing, which could further fuel inflation," she said.

Fahmida stressed that meeting the revenue goal would require substantial improvements in tax administration and taxpayer compliance. 

She added that while a larger budget could support growth, inflation would remain manageable only if productivity, incomes and investment efficiency improve in tandem. 

Fluctuations in global oil prices, she cautioned, could add further pressure on domestic prices.

The CPD executive director also questioned several macroeconomic assumptions underpinning the budget, describing them as overly optimistic. 

Unrealistic targets, she warned, risk undermining fiscal discipline and complicating monetary and expenditure management.

On exports, she noted that growth during the first 10 months stood at only 2.02%, making the projected 9.2% growth for the remaining two months appear unrealistic – a weakness that could also weigh on foreign exchange reserves.

She added that tax incentives must translate into higher productivity and stronger economic returns to deliver sustainable growth and meaningful gains in revenue collection.