[🇧🇩] Budget for 2025- 2026

[Saif]

A conservative budget for FY2026

Here’s to hoping that the interim government initiates targeted and critical reforms in FY2026 to improve budget implementation

www.thedailystar.net

A conservative budget for FY2026

VISUAL: SALMAN SAKIB SHAHRYAR

The proposed budget for the 2025-26 fiscal year, worth Tk 7.9 lakh crore, was presented by the finance adviser yesterday, at a time when the country is passing through unusual circumstances—both politically and economically. A non-political, unelected government, the result of the political changeover last year, formulated the budget amid several economic challenges.

On the economic front, despite the fact that several economic indicators show stability returning in nearly 10 months of the interim government, the outlook for investment and employment remains bleak. While some areas of the economy have shown progress to an extent, many other sectors have yet to see positive outcomes. Inflation, which remained over nine percent for 27 consecutive months, is showing a downward trend, reaching 9.05 percent in May 2025. However, there is a silver lining in the external sector. Strong remittance inflows have bolstered the foreign exchange reserves. Export income is also impressive. In the banking sector, several disciplinary measures have been undertaken, stemming the sector's continuous deterioration and easing the widespread panic that once plagued it.

Yet, significant challenges still remain. A new ordinance has been issued to regulate the banking industry, with steps taken to safeguard depositors' interests. The draft Banking Resolution Ordinance, 2025, which is available on the website of the Financial Institutions Division, delineates rules and regulations for improving the ailing banks. These measures are expected to help rebuild investor confidence.

In the current context, the FY2026 budget was expected to address some of the existing challenges. Controlling inflation, tackling investment hurdles, creating employment, and achieving macroeconomic stability are some of the crucial areas to which the government needs to pay attention to. The need for higher investment in human capital development and social protection cannot be ignored either.

Some of the major features of the proposed budget sheds light on the government's priorities.

The size of the FY2026 budget has been reduced by Tk 7,000 crore compared to its predecessor, reflecting a contractionary approach taken by the government to address the persistent economic struggles. The Annual Development Programme (ADP) allocation has been reduced by 13.2 percent compared to the original allocation in the FY2025 budget, which indicates a strategic shift towards fiscal consolidation. The budget deficit is set at 3.62 percent of GDP, which will be financed through domestic borrowing and foreign loans. Setting a lower budget deficit is a wise move in view of high inflation and limited fiscal space.

The revenue collection target for the incoming fiscal year is set at Tk 5.64 lakh crore, a 4.25 percent increase from the outgoing year's original target of Tk 5.41 lakh crore. The National Board of Revenue (NBR) is expected to collect Tk 4.99 lakh crore of this target. However, the revenue authority has historically struggled to meet such targets. Given the trend of revenue collection till March 2025, the deficit could exceed Tk 1 lakh crore by the end of the outgoing fiscal year. A practical and achievable target could improve tax collection predictability. The country's existing tax structure, with a tax-GDP ratio of less than eight percent, limits the government's ability to mobilise resources for development spending.

In view of the persistent inflationary pressure, the new budget proposes to raise the tax-free income threshold for individual taxpayers from Tk 3.5 lakh to Tk 3.75 lakh—but from FY2026-27. The tax measures will not provide much comfort to the low- and middle-income groups. The budget continues to rely on indirect taxes, so it will not effectively reduce the pressure of high inflation on the people. The government should attempt to collect taxes by expanding the tax net and curbing tax evasion. It also needs to undertake reforms to make the tax system more progressive and equitable.

The upcoming budget proposes to introduce some tax policies designed to enhance investment, such as withdrawing or reducing supplementary duties on several products and cutting customs duties on others in order to reduce the cost of doing business. These tax proposals aim to boost market access and trade competitiveness. The budget highlights creating a business-friendly environment to stimulate private investment, which has been sluggish due to high inflation, rising interest rates, and a weak law and order situation. The political upheavals of the July-August mass uprising, and the subsequent disruptions, resulted in further deterioration of the business environment and the overall economic stability. The uncertain political future is discouraging investors. Therefore, success of the economic measures will depend on how effective the political measures are in stabilising the country.

Despite the interim government's commitment to improving human development indicators, the FY2026 budget has reduced ADP allocation for the health sector by Tk 2,535 crore and for the education sector by Tk 2,971 crore compared to the outgoing fiscal year. This raises concerns about the government's ability to improve the quality of education and healthcare services, which are crucial for reducing poverty and enhancing human capital. It is undeniable that investing in people—teachers, students, doctors, nurses—is critical. Allocation for the agriculture sector in the ADP has also been decreased by Tk 2,424 crore, which is concerning from the food security perspective.

During high inflation, social safety net programmes play an important role. However, the efficiency of these programmes has been undermined due to the exclusion of genuinely poor citizens and inclusion of non-poor people. Besides, there are several common programmes that various institutions of the government implement. The budget has proposed reducing the number of such programmes to 95 from about 140 previously, which is a good move.

In the Mid-Term Macroeconomic Policy Statement (MTMPS) for FY2026-FY2028, the government has set the GDP growth target to be 5.5 percent for FY2026 and expects the inflation rate to decline to 6.5 percent. Achieving these targets will depend on addressing the current economic and political challenges and implementing some essential reforms. For example, the institutional reform of the NBR will be critical for meeting the revenue target. The government attempted to undertake such a reform through dissolving the NBR and establishing two new divisions under the finance ministry. However, the initiative has been stalled in the face of protests by NBR employees on administrative issues. It is crucial that this reform is implemented sooner rather than later through broader consultations with the relevant stakeholders to enhance efficiency and transparency in revenue collection.

Since a budget is designed only for a year, there is a limited scope for undertaking deep reforms. However, structural bottlenecks, including fiscal discipline and efficiency through institutional reform, are necessary to deliver budget commitments. Here's to hoping that the interim government will initiate a few targeted and critical reforms in FY2026 to improve budget implementation.

Dr Fahmida Khatun is executive director at the Centre for Policy Dialogue (CPD).​

 

[Saif]

Achieving the ambitious revenue target

The proposed budget for the fiscal year 2025-26, amounting to Tk 7.9 trillion, marks a significant shift in Bangladesh's fiscal objectives: moving away from grand development narratives towards pragmatic restraint and people-centric welfare. While rolling out the budget on Monday, Finance Adviser S

thefinancialexpress.com.bd

Achieving the ambitious revenue target
Atiqul Kabir Tuhin

Published :
Jun 05, 2025 01:34
Updated :
Jun 05, 2025 01:34

The proposed budget for the fiscal year 2025-26, amounting to Tk 7.9 trillion, marks a significant shift in Bangladesh's fiscal objectives: moving away from grand development narratives towards pragmatic restraint and people-centric welfare. While rolling out the budget on Monday, Finance Adviser Salehuddin Ahmed conspicuously refrained from announcing ambitious development projects or lofty GDP growth targets. Instead, his focus was squarely on ensuring human development through greater access to public healthcare and quality education, expanding social safety net coverage, and providing fund for innovative entrepreneurs and so on, aimed at building a welfare state in line with the vision of the July Uprising.

However, amid resource constraints and poor revenue collection, the finance adviser had to carefully calibrate a smaller budget, marking the first time a budget proposal has been lower than the previous year's. The proposed outlay is Tk 70 billion less than the current fiscal year's original allocation of Tk 7.97 trillion. While not a drastic cut, the reduction signals an austerity measure in response to a subdued economic outlook marked by high inflation, slack investment growth, liquidity crisis in banks and above all political uncertainty. The government aims to reduce fiscal deficit to around 3.6 per cent of GDP, the lowest level in over a decade, signaling its intent to restore fiscal discipline by reducing budget deficit and boosting domestic revenue collection. The challenge, however, lies in ensuring that this policy of fiscal restraint does not undermine investment in critical sectors such as health, education and job creation.

Meanwhile, financing this smaller budget will be a daunting challenge unless revenue collection improves significantly. The budget sets a revenue target of Tk 5.64 trillion, equivalent to 9 per cent of the gross domestic product (GDP). Of this amount, Tk 4.99 trillion is expected to be mobilised through the National Board of Revenue (NBR), while the remaining Tk 650 billion is projected to come from non-tax revenue sources.

However, a critical question is how will the government achieve the ambitious revenue collection target of Tk 5.64 trillion? Historically, revenue collection has consistently fallen short of targets, with the highest amount collected being Tk 3.75 trillion in FY23. Given the current slowdown in business activity and investment, along with rising unemployment, experts argue that the government's revenue goal is overly ambitious, and likely unattainable under current conditions.

If revenue collection falls short, the budget deficit will widen, which will force the government to increase borrowing from both domestic and foreign sources. The deficit is currently projected at Tk 2.26 trillion, with Tk 1.25 trillion expected from domestic sources and Tk 1.01 trillion from external sources. At this level, the deficit is considered manageable. However, if the shortfall in revenue leads to a higher deficit, the government may be compelled to rely more heavily on commercial bank borrowing, potentially crowding out private investment and pushing up borrowing costs. With treasury bills already offering interest rates of 11-12 per cent, banks are increasingly inclined to invest in government securities rather than lending to private borrowers. So, how will the private sector get adequate access to credit if the government taps deeper into the banking sector? Many suggest the government to take foreign loans at concessional interest rates. However, the country's external debt has already exceeded $100 billion, and the finance adviser has allocated a staggering Tk 1.22 trillion in the budget for interest payments on both domestic and foreign loans. Therefore, reducing government operational expenditure and boosting revenue collection are crucial for achieving sound fiscal management.

Ultimately, it all comes down to how the government will achieve the budget's ambitious revenue growth target of 27.98 per cent for the next fiscal year, especially given its persistent failure to meet revenue targets in the past. Meeting this target will be a significant challenge. However, many argue that the target itself is logical, pointing out that Bangladesh's revenue collection remains far too low relative to the size and growth of its economy. The country's public sector is among the lowest revenue-generating in the world. The country's tax-to-GDP ratio, a key indicator of revenue efficiency, stands at just 7.4 per cent, the lowest not only in South Asia but also among most global economies. In comparison, Nepal and India boast of tax-to-GDP ratios of 23.4 per cent and 20 per cent, respectively. Experts argue that, given the size of Bangladesh's GDP, the tax-to-GDP ratio should be at least 17 per cent. However, this target has remained out of reach due to widespread corruption and inefficiency within the revenue department. In addition, the prevalence of tax evasion remains alarmingly high among the people and businesses.

In a recent interview, the Finance Adviser cited a case in which a taxpayer owed Tk 1 billion in taxes but managed to get away with paying only Tk 100 million as tax-allegedly by bribing a tax commissioner with Tk 600 million and pocketing the remaining Tk 300 million. This is not an isolated incident; similar cases are widespread across the country. Retail VAT evasion, along with tax avoidance in the informal businesses and e-commerce sector, also contributes significantly to revenue losses. It is estimated that over 30 million businesses operate in the country, yet fewer than 2 per cent are registered for VAT. Corruption is also rampant in customs operations. According to one estimate, trade mispricings alone cost Bangladesh approximately $8.27 billion annually between 2009 and 2018. These issues underscore the urgent need for procedural reforms, stronger oversight, and greater accountability within the revenue department.

Recognising these challenges, the government recently took the bold step to dissolve the NBR and create two new entities: the Revenue Policy Division, responsible for tax law formulation and policy, and the Revenue Management Division, tasked with revenue collection and enforcement. This reform aims to enhance accountability, efficiency, and transparency. However, progress in implementing this vital reform measure has been stalled in the face of protests from NBR employees, who have a vested interest in retaining control over both policy formulation and enforcement functions.

Hence, the government's ability to achieve its revenue target depends on implementing the reforms, cracking down on corruption, broadening the tax base and strengthening administrative capacity. Bangladesh's economy stands at a critical crossroads. Success in overcoming revenue challenges will determine not only the country's economic stability but also the realisation of a more equitable and welfare-oriented society.​

 

[Saif]

Proposed budget doesn’t reflect opinions of political parties, public: BNP

The Bangladesh Nationalist Party (BNP) has alleged the interim government has announced the proposed budget for the 2025–26 fiscal year taking opinions from political parties and the public. BNP standing committee member Amir Khasru Mahmud Chowdhury made the allegation during the party’s...

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Proposed budget doesn’t reflect opinions of political parties, public: BNP
Staff Correspondent Dhaka
Updated: 04 Jun 2025, 17: 46

BNP standing committee member Amir Khasru Mahmud Chowdhury talks to the media on 4 June 2025 Prothom Alo

The Bangladesh Nationalist Party (BNP) has alleged the interim government has announced the proposed budget for the 2025–26 fiscal year taking opinions from political parties and the public.

BNP standing committee member Amir Khasru Mahmud Chowdhury made the allegation during the party’s official response to the proposed budget.

The response was presented at the BNP chairperson’s political office in Gulshan, Dhaka on Wednesday afternoon.

Since there is currently no functioning parliament or democratic government in the country, BNP had expected the interim government would formulate the budget through discussions with political parties involved in the anti-fascistmovement, and establishing a minimum level of national consensus, Amir Khasru stated.

The government could have sought opinions from people of various professions, he pointed out.

The BNP leader also said experts, civil society members, business representatives, and youth could also have been included in the process. However, this was not done.

Amir Khasru remarked that had the views of political parties and the public been considered, the budget would not have been unilateral, nonparticipatory, or a continuation of the same conventional pattern.

Amir Khasru said the current inflation rate is nearly ‘double digit’. The government is saying to bring it down to 6.5 per cent, which appears to be unrealistic. The rate of increase in poverty could have been curbed. The World Bank figures show more than 2.7 million people have become more pure in the last 10 months under the interim government.

The BNP leader further said, “According to the Bangladesh Bureau of Statistics, GDP growth in the 2024–25 fiscal was 3.97 per cent. However, in the current budget, it has been projected at 5.6 per cent, which, like previous governments, is unrealistic and merely growth on paper.”

“Food security is under threat. The attempt to show an increase in allocation by including pensions and agricultural subsidies under the inadequate, flawed, and corruption-ridden social safety net sector is misleading. Nevertheless, government allocation for social protection remains insufficient.”

Amir Khasru remarked that the reduction in allocation for vital sectors such as education, healthcare, and agriculture is a cause for concern. He stated that private universities, medical colleges, colleges, and schools could have been brought under full tax exemption. He added that, if the BNP comes to power in the future, these areas of education will be brought under full tax exemption.

Amir Khasru stated that the budget should have included a clear roadmap to address the weaknesses in the economic framework.

He said the primary focus should have been on presenting a strategy for increasing private investment, establishing industries, and creating employment as part of economic recovery.

Priority should have been given to education, healthcare, and agriculture. It was essential to foster new entrepreneurs by supporting small, cottage, and medium-sized enterprises. The high interest rates, coupled with increased taxes and duties, will place significant pressure on industries—particularly the productive sectors.

Many businesses may be forced to shut down, leading to reduced employment opportunities. If financial pressure on the middle and lower-income classes increases, it could fuel economic instability. Progress in poverty alleviation may also come to a halt.

Amir Khasru stated that the budget lacks any specific plans to reduce the cost of doing business, cut bureaucratic red tape, or lower the overall expenses of business operations. As a result, he said, entrepreneurs will face an uncertain and unfavourable environment.

He also pointed out that the increase in duties on online businesses will put pressure on digital entrepreneurs. According to him, this will lead to greater frustration among young entrepreneurs and discourage innovation.

Amir Khasru said the banking sector is in a fragile state. Initiatives to realise default loans, bring back laundered money and to expand the tax net could set a new basement in tax collection. The government is over dependent on the bank.

“Taking loans to clear debts is a threat to economic stability in the long run. The option to whiten black money is a reward for the tax evaders. It’s an injustice for the regular taxpayers. It will affect people’s confidence in the revenue system," Amir Khasru said.

Also present at the press conference were BNP standing committee members Gayeshwar Chandra Roy and Selima Rahman, BNP chairperson’s adviser Ismail Jabiullah, media cell member Shayrul Kabir Khan and press wing member to the chairperson, Shamsuddin Didar.​

 

[Saif]

Opinions of parties, people not reflected in budget: BNP

Calling the interim government's maiden budget conventional, the BNP on Wednesday said the proposed budget for the 2025-26 fiscal year was placed without the opinions of political parties and the people. BNP Standing Committee member Amir Khasru Mahmud Chowdhury said this at a post-budget press co

thefinancialexpress.com.bd

Opinions of parties, people not reflected in budget: BNP

FE REPORT
Published :
Jun 05, 2025 08:31
Updated :
Jun 05, 2025 12:44

Calling the interim government's maiden budget conventional, the BNP on Wednesday said the proposed budget for the 2025-26 fiscal year was placed without the opinions of political parties and the people.

BNP Standing Committee member Amir Khasru Mahmud Chowdhury said this at a post-budget press conference at the party chairperson's Gulshan office in the capital.

He said the budget formulation would not have been one-sided and non-participatory if people's voices were heard.

Khasru said since there is no parliament or democratic government in the country now, the BNP expected that the interim government would formulate the budget by establishing a minimum national consensus after discussing with the political parties and entities that joined the anti-fascist movement.

He said inflation has reached almost double-digits currently.

There are discussions on reducing inflation to 6.5 per cent, which does not seem realistic, he said.

The BNP leader also said according to the Bangladesh Bureau of Statistics (BSS), gross domestic product (GDP) growth in the 2024-25 fiscal year was 3.97 per cent.

Growth was estimated at 5.6 per cent in the new budget. This is also an unrealistic and paper-based projection like the previous government, said Khasru.

He mentioned that reducing allocations for important sectors like education, health, and agriculture is worrying.

Additional taxes and duties along with huge interest rates will create great pressure on industries. Especially the productive sectors would be affected. Many institutions may close.

Employment may also decrease, the BNP leader went on.

If the financial pressure on the middle- and low-income groups increases, economic instability may rise and progress in poverty alleviation may also come to a halt, he added.

Citing the World Bank data, he said more than 2.7 million people have become poorer than before during the interim government's tenure.

He further said the economic growth figures are declining and an elected government can help get out of the situation.

Khasru mentioned that digital entrepreneurs would come under pressure due to the increased taxes on online businesses.

This would increase the frustration of young entrepreneurs, he said.

He also said the financial condition of banks is fragile.

Taking steps like recovering default loans and laundered money, as well as expanding the tax net would create a new foundation for revenue collection, said the BNP leader.

The government is heavily dependent on the banking sector, he said, adding that repaying debts by taking on more debts, allowing the whitening of black money, and over-dependency on banks are threats towards a sustainable economy.

Referring to the facilities the readymade garment sector is enjoying due to measures taken by late president Ziaur Rahman, he said if the BNP comes to power, it would give such facilities to some other sectors to help expand the economy and diversify the export basket.​

 

[Saif]

Few measures may raise business costs, deter investment: ICAB

Chartered accountants on Wednesday raised concerns that several proposed fiscal measures in the FY26 budget may lead to higher costs for businesses and reduced private-sector investment, especially amid the ongoing economic uncertainties. At a press conference held at its office in the capital, th

thefinancialexpress.com.bd

FY ’26 Post-budget reactions
Few measures may raise business costs, deter investment: ICAB
Rise in minimum tax main issue
FE REPORT
Published :
Jun 05, 2025 08:27
Updated :
Jun 05, 2025 08:27

Chartered accountants on Wednesday raised concerns that several proposed fiscal measures in the FY26 budget may lead to higher costs for businesses and reduced private-sector investment, especially amid the ongoing economic uncertainties.

At a press conference held at its office in the capital, the Institute of Chartered Accountants of Bangladesh (ICAB) said some measures show promise, especially those aiming at digitisation and administrative simplification, but others may raise the cost of doing business and deter private sector growth.

It urged the government to have a broader dialogue among policymakers, industry leaders, and financial professionals, saying it is essential to refine the budget for sustainable economic recovery and growth.

ICAB President Maria Howlader lauded a landmark inclusion in the budget - the government's recognition of women's unpaid household labour as a contributor to the gross domestic product (GDP) - which she described as a "major policy change".

She expressed concerns about the feasibility of achieving the revenue target without modernising the tax structure and expanding the tax net.

As for individual taxation, she criticised the minimal increase in the tax-free income limit - from Tk 3,50,000 to Tk 3,75,000 - and the rise in minimum tax for marginal taxpayers from Tk 3,000 to Tk 5,000. She urged a higher tax-free threshold of Tk 4,50,000 to offer relief to low-income earners and emphasised the need for a more progressive and equitable tax regime.

Maria opposed the increase in turnover tax to 1 per cent, stating that taxing turnover instead of profit is inconsistent with a fair tax policy.

However, she welcomed other proposals to boost private investment and reduce business costs, including the removal or reduction of supplementary duties and tariffs on several products.

She also appreciated tax measures to rationalise the effective tax rate, including adjustments for bad debts as per IAS/IFRS standards, quarterly filing of withholding tax return, and reduced tax on brokerage commissions and merchant banks.

As for VAT and customs, she praised reduced advance tax on raw material imports and acceptance of ERP books for VAT purposes, while raising concerns about increased VAT on commercial goods and commissions from online sales.

She also expressed concerns over new regulatory duties on essential and healthcare items.

Commenting on macroeconomic risks, the ICAB president warned that borrowing from domestic sources - 12.25 per cent of the total budget - could fuel inflation, which already stands at over 9.17 per cent.

Snehasish Barua, partner at Snehasish Mahmud & Co, presented the keynote at the event.

He emphasised that inflationary pressures - driven by increased money supply and demand - require urgent containment, stressing the need for enhanced market monitoring and stable supply chains to prevent further price hikes.

Besides, he observed that due to the increase in minimum tax under Section 163 of the Income Tax Ordinance, even companies not making taxable profits will face higher tax burdens.

"For large firms with a substantial turnover, this would significantly increase the cost of doing business. For small businesses, more than 50 per cent of their profits may now go to the government, while loss-making companies could see their tax burden rise by 67 per cent." He said that companies listed on the stock exchanges but with less than 10 per cent of their shares floated through initial public offerings (IPOs) will be taxed at the higher rate of 27.5 per cent, equivalent to private companies.

Snehasish suggested the government extend the same condition to follow-on public offerings (FPOs) for consistency. He noted that Bangladesh already has the highest corporate tax rates among the peer countries, such as Vietnam, Indonesia, and Sri Lanka, for public and private limited companies as well as banking institutions.

"A logical and timely reduction in corporate tax is viewed as essential to encourage business activities and investment during this challenging period."

While reduced tax deducted at source (TDS) rates are expected to boost trading, he said, the increased minimum taxes - up by 67 per cent for companies and nearly 300 per cent for individual businesses - could hinder investment in new projects, ultimately affecting the GDP growth.

He advocated for a faster, digitised customs clearance system and urged the National Board of Revenue (NBR) to adopt international best practices, including easing conditions for participation in the authorised economic operator (AEO) programme to encourage self-compliance.

ICAB Chief Executive Officer Shubhashish Bose said the government refrained from increasing indirect taxes, aligning its policies with the World Trade Organisation (WTO) guidelines.

"Such measures are also part of the broader strategy to prepare for the country's LDC graduation."

He termed the budget a "preparatory blueprint" for Bangladesh's transition to a developing economy, with a focus on long-term sustainability, fiscal discipline, and global competitiveness.

Mohammed Humayun Kabir, vice president of the South Asian Federation of Accountants (SAFA) and past president of ICAB, moderated the discussion.​

 

[Saif]

Poverty spending shrinks in new budget

Despite mounting economic pressures on low-income households, the government has slashed the allocation for poverty reduction in the proposed national budget for FY2025-26, raising concerns among economists and development experts about the direction of fiscal priorities. The proposed budg

thefinancialexpress.com.bd

Poverty spending shrinks in new budget
Economists warn of 'mistimed retreat' amid soaring inflation, sluggish growth

JAHIDUL ISLAM
Published :
Jun 12, 2025 01:10
Updated :
Jun 12, 2025 01:10

Despite mounting economic pressures on low-income households, the government has slashed the allocation for poverty reduction in the proposed national budget for FY2025-26, raising concerns among economists and development experts about the direction of fiscal priorities.

The proposed budget earmarks Tk 4.48 trillion for poverty reduction, down from Tk 4.61 trillion in the original budget for the outgoing fiscal year.

As a share of the total budget, poverty-focused spending has decreased from 57.9 per cent to 56.77 per cent, according to a Finance Division summary titled "Poverty Reducing Expenditure."

In absolute terms, this marks a nominal cut of Tk 129.94 billion in poverty-related allocations within a single fiscal year. The decline in budget share amounts to 1.13 percentage point year-on-year.

A longer-term view shows an even more concerning trend. The revised budget for FY 2023-24 allocated Tk 4.33 trillion-60.66 per cent of the total outlay-for poverty reduction.

Over just two years, the share of poverty-related spending has dropped by 3.89 percentage points, signaling what many see as a waning policy emphasis on poverty alleviation.

Economists warn that this shift comes at a particularly vulnerable time. With persistently high inflation, weak investment, and a slow recovery in employment, lower-income groups are under increasing stress.

Yet the new budget appears to reduce, rather than strengthen, the fiscal support aimed at them.

"It is disappointing that the announced budget, unveiled amid high inflation and a slowdown in investment and employment, has reduced rather than increased support for the poor-falling short of the rising demand for expanded benefits to protect vulnerable populations," said Dr Mustafa K. Mujeri, former Director General of the Bangladesh Institute of Development Studies (BIDS).

He expressed concern that much of the allocation may not reach its intended beneficiaries due to inefficiencies in targeting and implementation.

He emphasised the need for greater direct support for the poor through social safety nets, such as cash transfers and subsidised food distribution.

The national budget for FY 2025-26, proposed by Finance Advisor Dr Salehuddin Ahmed on June 2, includes Tk 3.01 trillion in direct poverty reduction spending, or 38.10 per cent of the total budget, and Tk 1.47 trillion (18.66 per cent) in indirect spending with potential poverty alleviation impact.

This marks a decline from last year's original budget, where direct and indirect poverty reduction shares stood at 38.88 per cent and 19.02 per cent respectively.

According to the Finance Division, Tk 2.84 trillion-or 53.06 per cent of the Tk 5.35 trillion operating budget-is considered poverty-reducing expenditure. An additional Tk 1.63 trillion, or 66.46 per cent of the Tk 2.46 trillion development budget, is similarly classified.

Budget documents reveal that the Ministry of Food will receive the largest poverty-focused share of its allocation, 98.01 per cent, followed by the Bridges Division (94.04 per cent) and the Statistics and Informatics Division (90.44 per cent).

Other high-ranking ministries include the Ministry of Disaster Management and Relief (88.43 per cent), Ministry of Railways (87.66 per cent), and Ministry of Primary and Mass Education (87.22 per cent).

On the other end of the spectrum, several government institutions show negligible or no poverty-focused allocations. The President's Office and the Office of the Comptroller and Auditor General received zero per cent, while the National Parliament received just 0.25 per cent.

Other low-ranking agencies include the Supreme Court of Bangladesh, Economic Relations Division, and the Anti-Corruption Commission.

Dr Selim Raihan, Professor of Economics at Dhaka University and Executive Director of the South Asian Network on Economic Modeling (SANEM), was more critical of the classification itself.

"Who is this report being made to satisfy?" he asked, calling the poverty-reduction label "arbitrary and ad hoc."

He argued that only well-targeted social protection programmes can be considered direct poverty reduction, while broader development investments-though important-should not be lumped together without clear methodological justification.

Raihan also pointed out that economic growth in recent years has not translated into proportionate income growth, and poverty levels have not declined as expected.

He warned that unless poverty spending is restructured and better targeted, the budget risks failing the very people it claims to support.​

 

[Saif]

In quest of a practical budget

The annual budget of the government is the most crucial fiscal event which has a bearing on the living conditions of all social groups. It is the main conduit of national resource mobilisation and management. Every year in June, the country receives its annual national budget for the upcoming

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In quest of a practical budget

Asjadul Kibria
Published :
Jun 14, 2025 22:46
Updated :
Jun 14, 2025 22:46

The annual budget of the government is the most crucial fiscal event which has a bearing on the living conditions of all social groups. It is the main conduit of national resource mobilisation and management. Every year in June, the country receives its annual national budget for the upcoming fiscal year. After unveiling the budget by the man-in-change of national exchequer, different stakeholders scrutinise the various fiscal proposals placed in the budget. They also submit their suggestions and demands for the inclusion or exclusion of specific measures. Finally, the proposed budget receives approval from the parliament with or without some amendments. Thus, the proposed budget becomes the original budget.

Besides placing the budget proposal for the new fiscal year, the finance minister also declares a revised budget for the outgoing fiscal year. When the national parliament is operational in the country, he/she also presents a supplementary budget for the approval of the lawmakers.

The general trend in Bangladesh is to revise the proposed or original budget by reducing the original outlay. Ultimately, the size of the actual or implemented budget gets further reduced, mainly due to inefficiency in public spending, coupled with the wrong selection of development projects and inadequate mobilisation of resources. Budgetary decisions are primarily dependent on the availability of resources.

The government has been disclosing the status of the implemented or actual budget since FY09 in the budget document, specifically in the 'Budget in Brief.' This document provides a concise overview of the budget, including key figures and policy priorities. The practice brings some amount of transparency in the case of public spending disclosure and helps analysts and stakeholders get a more realistic picture of the budget.

In the first week of this month, the finance adviser to the interim government unveiled the national budget for the fiscal year 2025-26 (FY26). As there is no parliament in the country, Dr Salehuddin Ahmed, the finance adviser, delivered his budget speech via television and radio. Titled 'Building an Equitable and Sustainable Economic System', his speech nominally outlined the future direction of Bangladesh's economy.

Breaking the tradition of incremental budgets over the last five and a half decades, Salehuddin proposed an outlay of Tk 7.90 trillion for FY26, which is around one per cent lower than the original outlay of Tk 7.97 trillion for FY25. The proposed budget for the next fiscal year, however, is 6.20 per cent higher than the revised budget for the current fiscal year. Nevertheless, the modest increase over the revised budget is also a deviation from the long practice. For the last 15 years, since FY10, the proposed budget for the new fiscal year has shown a double-digit rise over the revised budget of the current fiscal year. Considering the high rate of inflation, the 6.20 per cent increase in the proposed FY26 budget over the revised FY25 budget is also not a hike, in real terms. The annual average rate of inflation stood at 10.13 per cent in May this year.

The reduced outlay of proposed public spending for the next fiscal year is a reflection of reality. During the last decade of the ousted Hasina regime, the annual average rate of hike in the proposed budget was 13.40 per cent. Most of the time, inflated outlay was proposed to widen the misappropriation and misuse of public money. The reduction in the proposed outlay for the next fiscal year could potentially lead to a more efficient allocation of resources, but it also raises concerns about the adequacy of funding for key sectors.

The finance adviser also delivered an abridged speech of around 7,000 words, whereas the original text contained around 17,000 words. The shortened version also helps viewers and listeners maintain their concentration.

Nevertheless, the unnecessary delay in making the budget documents public was a disturbing development, especially for analysts and the media. For many years, budget documents were made public when finance ministers began delivering their budget speeches. The practice is disrupted this time. The transmission started at 3:00 pm, and the finance ministry made the documents public after nearly an hour, without any apparent reason. The media personnel who gathered at the Ministry of Information to collect the budget documents also waited for an hour to obtain the documents. Despite repeated requests, the officials did not distribute the documents, quoting the official instruction to wait until the end of the speech. Over the years, journalists have been urging the government to announce the budget before noon. Regrettably, the Yunus-led interim government stuck to the previous timing of budget presentation.

True, the budget is not a panacea for all financial problems, though it is the most critical instrument of a government to manoeuvre public investment and development activities. In a democratic environment, the nature of the budget-making process should be more people-oriented, and policymakers should pay due attention to ensure that the expectations and aspirations of the people are reflected in the budget. According to some economists, public choice and democracy are interrelated, and the economic interpretation of democracy is that public wants and desires be entertained in the budget.

So, the budget process needs to be judged on the basis of (i) the constitutional obligations of the government, (ii) changes in the domestic political perspectives, and (iii) changes in the global economic environment. Like the previous finance ministers, the finance adviser also tried to comply with these three aspects.

Nevertheless, a budget is also not simply an annual financial statement of the government or a set of documents prepared by the bureaucrats, but rather a political tool which combines political decision-making with bureaucratic procedure. It is the numerical documentation of the government's political ideology, which is to be implemented through a suitable economic framework.

Over the last 16 years, it has been observed that the actual budget spending was, on average, 14 per cent lower than that of the original budget and 11 per cent lower than the revised budget, which is the budget that has been adjusted after the initial proposal to account for any changes or new information. Only the actual or implemented budget of FY11 was around 3 per cent and 1.5 per cent lower than the original and revised budgets of the year, respectively.

As the final implementation of the budget is generally lower than the proposed or revised outlay, it implies a structural weakness in the country's public expenditure system. This has led to some critical areas being deprived of due allocation or public investment, while some less important sectors are flooded with funds. The FY26 budget is a modest attempt to deviate from this trend. Its success, however, will depend significantly on the actions of the democratically elected government in the near future, underscoring the importance of their role in the budgeting process.​

 

[Saif]

Bangladesh's austerity budget at a challenging time

The Interim government presented its annual budget on June 2, with a total outlay of TK7.9 trillion which is 0.88 per cent lower than the outgoing budget, and a revenue target of TK5.64 trillion resulting in a budget deficit of TK 2.26 trillion. It is a trimmed budget relative to budgets presented

thefinancialexpress.com.bd

Bangladesh's austerity budget at a challenging time

Muhammad Mahmood
Published :
Jun 14, 2025 22:41
Updated :
Jun 14, 2025 22:41

The Interim government presented its annual budget on June 2, with a total outlay of TK7.9 trillion which is 0.88 per cent lower than the outgoing budget, and a revenue target of TK5.64 trillion resulting in a budget deficit of TK 2.26 trillion. It is a trimmed budget relative to budgets presented in previous years reflecting stark economic reality facing the country. The economy is facing a combination of slow growth, high inflation, and rising unemployment notwithstanding the impending political changeover.

Even after almost ten months in power, there remains a sense of unease about the future as to whether the interim government under the leadership Nobel Laureate Professor Mohammad Yunus can get the economy back on track while spearheading political reforms needed to rebuild a durable democratic system and prevent another dictator from emerging. The economic factor will ultimately be the key issue in determining the interim government's success. It is a monumental challenge.

The finance Advisor in defending his austere budget said the budget "is realistic, pragmatic and implementable' in the current economic context. Such a scaled down "responsible" budget most likely will receive positive nod from the IMF and the World Bank if not from the economically disadvantaged section of the population.

The measures to reduce the budget deficit have resulted in a decrease in annual development expenditure, set at Tk 2.3 trillion, which is a 13.2 per cent decline from the original allocation in the previous budget. The proposed fiscal deficit of TK1.25 trillion will further balloon the already accumulated public debt despite the austerity measures.

In 2024, Bangladesh's public debt was $181,008 million. This amount represented 40.13 per cent of Bangladesh's GDP. Bangladesh's debt per capita in 2024 was $1,056. The public debt is composed of domestic debt (56 per cent of total debt) and external debt (44 per cent). Bangladesh's Private debt and household debt debts stand at 36.92 per cent and 6.69 per cent respectively of GDP in 2025.

Now the debt/GDP ratio is also expected to rise further at the end of fiscal 2025-26. Because debt is a stock rather than a flow, it is measured as of a given date, usually the last day of the fiscal year. Interest payment will account for 22 per cent of total revenue budget or 15.5 per cent of total spending. Between 1979-80 and 2024-25, Bangladesh always ran budget deficits except for four years. It indicates the budget has a structural deficit problem rather than cyclical.

The debt/GDP ratio for Bangladesh is notably lower when compared to the United States at 125 per cent, the United Kingdom at 105 per cent, and Japan at 270 per cent. If output falls sharply and the deficit grows, the debt/GDP ratio for Bangladesh will further climb up. Only budget surplus or high economic growth can help reduce the debt/GDP ratio.

The government also increased subsidy spendings to deal with rising oil, gas and fertiliser prices amounting to 11.3 per cent of budget expenditure. In the present situation, continuous dependence on existing energy and food subsidies will restrict adjustments in domestic prices and hinder fiscal measures from promptly addressing any significant economic challenges that may emerge in the coming months or years. Therefore, it is imperative that the emergency economic support does not become deeply ingrained.

A structural deficit problem implies that even allowing cyclical fluctuations in the economy, current government spending is being financed by borrowing. With structural deficit, therefore, a deficit will be posted regardless of the strength of the economy. A structural deficit problem implies that borrowing will become increasingly unsustainable or more expensive. A structural deficit problem can lead to a rise in interest payments as a percentage of GDP which means increasing amount of tax revenue would be needed to make debt interest payments.

Only spending cuts or raising revenue or both are methods that can get rid of structural deficits. But neither of these methods are appealing to any government and that is why structural deficits continue to linger. More importantly, spending cuts and tax concessions combined can also create a challenge more existential than fiscal. Therefore, the government could reform the taxation regime to solve the structural deficit problem. The current budget does not address that issue significantly.

This budget further demonstrates that Bangladesh is trapped in highly bureaucratised budgetary system with deep structural impediments. A notable example is the longstanding budgetary practice that still provides opportunities to legalise laundered money. This budget is no different in this regard. There also appears to be an inability to reform the taxation system which remains a critical issue for a long time.

10.2 per cent of budget allocation went for the public administration up by 1 percentage point along with increased special benefits for public servants who are set to receive a "special benefit" of up to 15 per cent on their basic salary. It remains unclear what productivity gains were achieved by public servants that justified an increased allocation. Also, the public service in Bangladesh is not known for efficiency. In fact, the public service in Bangladesh is highly bloated, inefficient and also known to be corrupt.

The Budget has allocated Tk 89.2 trillion for subsidies. While energy remains the primary focus, subsidies allocated for fertiliser, mechanisation, and food assistance remain in place as before. Continued reliance on existing energy and food subsidies will constrain adjustments in domestic prices, subsequently limiting the effectiveness of fiscal measures in addressing potential economic challenges that may occur in the coming months or years. Emergency economic support should not become permanent.

The budget has set a GDP growth rate target of 5.5 per cent for the fiscal year 2025-26 against a realised GDP growth rate of 3.97 per cent for the current fiscal year and an inflation target of 6.5 per cent. However, such a growth projection comes at a time when all major economies are facing a downturn, the US is set to suffer the sharpest drop. The OECD predicts US growth will slow from 2.8 per cent in 2024 to 1.6 per cent in 2025 and 1.5 per cent in 2026. The OECD further said, "This reflects the substantial increase in the effective tariff rate on imports and retaliation from some trading partners, high economic policy uncertainty, a significant slowdown in net immigration, and a sizeable reduction in the federal workforce." The inflation target appears challenging based on the experience of the past few years as well as the current economic and political climate.

An economic slowdown in developed countries is concerning for developing countries like Bangladesh, which depend on exports to wealthy regions such as the US, UK, and EU. Economic slowdown in these countries will hit Bangladesh hard. It is also to be noted that all developing countries including Bangladesh are at the receiving end of the advanced economies macroeconomic policy consequences. The budget document does not indicate that the Bangladesh economy may experience a significant slowdown, recession, or stagflation. Rather the picture painted is just the opposite.

According to the World Bank during the interim government's tenure, more than 2.7 million people have become new-poor. Of these, 1.8 million are women. Wages have not kept up with inflation, reducing real incomes. High inflation and increasing unemployment are indicators of an economy potentially experiencing stagflation. Domestic and foreign investment are stagnant, and income inequality is increasing, further worsening economic turmoil.

For a trade dependent country like Bangladesh, budget deficits can boost inflation considerably. Also, fiscal deficits can widen the current account deficit and push up interest rates. An appreciating US dollar as reflected in the BDT/USD exchange rate will make debt repayment or buying commodities even more expensive.

The budget includes measures designed to prepare the economy for becoming a lower-middle income country by November of next year. With that objective in mind, the tariff structure has been simplified by reducing tariffs and removing supplementary and regulatory duties on a very large number of goods rather than introducing a simplified tariff rate across the board. Despite design limitations, this is a positive step towards creating a more competitive environment in the country which is the key to productivity growth.

The principal fiscal challenge facing Bangladesh needs to be viewed in the context of high inflation, rising unemployment, poverty and income inequality and falling to stagnant investment both domestic and foreign. This fiscal year's budget prioritises debt servicing over public welfare. Structural reforms are necessary and have been recognised for a long time as crucial. But the budget appears to be business-as-usual type without any attempt to undertake structural reforms needed to revamp the economy.​