[🇧🇩] Budget for 2026

[Saif]

Next national budget will be business-friendly: Adviser Salehuddin

Finance Adviser Salehuddin Ahmed on Thursday assured that the upcoming national budget will be business-friendly, incorporating a favourable tax policy to boost investment, GDP growth, and employment generation. “We will present a business-friendly budget with a favourable tax policy to enha

thefinancialexpress.com.bd

Next national budget will be business-friendly: Adviser Salehuddin
FE Online Desk
Published :
Mar 20, 2025 19:38
Updated :
Mar 20, 2025 19:38

Finance Adviser Salehuddin Ahmed on Thursday assured that the upcoming national budget will be business-friendly, incorporating a favourable tax policy to boost investment, GDP growth, and employment generation.

“We will present a business-friendly budget with a favourable tax policy to enhance overall investment, GDP, and employment. The business community has provided us with a set of practical suggestions,” he told reporters after a pre-budget meeting with business leaders at the Finance Division Conference Room at the Bangladesh Secretariat, UNB reports.

Salehuddin said the business community has urged the government to lower tax rates across various sectors and streamline tax payments through online platforms.

Regarding customs procedures, he noted that the government would consider the business community’s suggestions concerning the Harmonized System (HS) code.

Bangladesh Chamber of Industries (BCI) President Anwar-Ul-Alam Chowdhury said the discussion mainly focused on National Board of Revenue (NBR)-related issues, particularly income tax.

“The finance adviser appeared positive, emphasising that the NBR should strengthen efforts in revenue mobilization and tax collection. However, our primary concern remains enhancing industrial competitiveness,” he said.

Chowdhury added that the finance adviser requested written proposals regarding banking sector issues and fiscal support.

Leaders from the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), and Bangladesh Textile Mills Association (BTMA) also placed their suggestions during the meeting.

BCI President Anwar-Ul-Alam Chowdhury stressed the importance of aligning tax assessment with international practices, to which the Finance Adviser agreed.

BKMEA President Mohammad Hatem expressed optimism that the meeting would lead to positive changes in the taxation system, as assured by the NBR Chairman.

“We requested a revision of the provision requiring a 1 per cent Advance Income Tax. Tax should be paid on profit, but currently, tax is deducted at source on total sales,” Hatem said.

While the business leaders did not propose changes to corporate tax rates, they advocated for reducing VAT in specific sectors. They also recommended standardizing the HS code to six digits for efficient customs clearance under the bond management system.

Hatem noted that the business community appreciated improvements in services at Chattogram Customs House. He urged the government to simplify VAT regulations and HS code complexities.

Additionally, the BKMEA requested direct cash incentives on export proceeds to avoid procedural complications.

In a formal proposal, the BKMEA suggested maintaining the source tax for the Ready-Made Garment (RMG) sector at 0.5 per cent for the next five fiscal years (until FY30), treating it as the final tax realization.

They also demanded a business-friendly taxation policy, necessary reforms, and full VAT exemption on products and services related to 100 per cent export-oriented RMG industries.​

 

[Saif]

Next budget likely Tk 7.92t with doable Targets

Bangladesh's upcoming budget may be Tk 7.92 trillion in size, smaller than the current one, as the interim government walks a tightrope amid a subdued trend in revenue earnings and foreign-aid inflow in the present context. Officials give the possible budgeting outlook, saying that this is for the

thefinancialexpress.com.bd

Taming inflation to 6.5pc pivotal promise
Next budget likely Tk 7.92t with doable Targets
ADP Tk 2.3t, GDP growth target modest 5.5pc

Syful Islam
Published :
Apr 11, 2025 23:50
Updated :
Apr 11, 2025 23:50

Bangladesh's upcoming budget may be Tk 7.92 trillion in size, smaller than the current one, as the interim government walks a tightrope amid a subdued trend in revenue earnings and foreign-aid inflow in the present context.

Officials give the possible budgeting outlook, saying that this is for the first time Bangladesh is framing a smaller budget compared to the previous one, as the government also takes into consideration slower implementation of the current budget.

A technical committee meeting on budgeting at the ministry of finance made the decision Wednesday. The committee for coordination on fiscal, monetary, and currency exchange, headed by finance adviser Dr Saleh Uddin Ahmed, will take the final decision on the budget for the fiscal year 2025-26.

The national budget for the outgoing financial year, 2024-25, is worth a total of Tk 7.97 trillion. Its size was revised down by Tk 490 billion with cuts from the original annual development programme (ADP) of Tk 2.65 trillion. Finance Ministry sources have said the National Board of Revenue may be given a daunting task of collecting Tk 5.10 trillion in the next fiscal year, up from Tk 4.80 trillion in the current year.

The ADP outlay may be fixed at Tk 2.30 trillion for the next fiscal year, according to officials concerned.

The government may set GDP (gross domestic product) growth target at 5.5 per cent in the next fiscal year, compared to 6.75 per cent in the outgoing fiscal year.

Officials say in the next budget the government may set a target of bringing down the rate of inflation to 6.5 per cent, similar to the current budgetary target. In the current fiscal year until March, inflation remained defiant of the target to hover between 11.66 per cent and 9.32 per cent.

Also, the government plans to keep budget deficit below 4.0 per cent against 4.6% of the GDP in the current fiscal year, according to officials concerned.

Finance officials say the major target to be laid in the next fiscal budget will be lessening inflation and enhancing budget implementation.

They say against the budgetary target of Tk 4.80 trillion, the National Board of Revenue until this February, could generate Tk 2.21 trillion. At the end of the fiscal year, they predict, the NBR "may end up collecting Tk 4.0 trillion at best, which is significantly lower than the revised target of Tk 4.635 trillion".

The ADP implementation until February was below 25 per cent-the lowest tally in 14 years-as official data showed.

As such, they say, funding a big budget in the next fiscal year will be difficult and such a big budget will remain largely unimplemented.

Dr Fahmida Khatun, executive director at the Centre for Policy Dialogue (CPD), finds a few reasons for having a small budget for the upcoming fiscal year.

First one is Bangladesh has been grappling with persistently low tax revenues. The tax-to-GDP ratio remains among the lowest globally, limiting government's fiscal capacity, she mentions.

Ms Khatun notes that as part of the $4.7-billion loan programme with the International Monetary Fund (IMF), Bangladesh is required to implement several fiscal reforms. These include reducing the budget size, enhancing tax collection, adopting market-based exchange rate, and narrowing budget deficit.

In the second place is the government aim to bring inflation down to about 6-7 per cent in FY 2025-26. To achieve the target, the government needs to implement cost-saving measures in public spending alongside pursuing a contractionary monetary policy, she notes.

"While the decision to downsize the national budget aligns with efforts to stabilise the economy and meeting international obligations, it poses challenges such as lowering public spending which could affect employment generation," says the CPD executive director.

She feels that it's a must-do for the government to mitigate the adverse effects. "It must prioritise efficient resource allocation, protect essential social programmes for the poor, and implement reforms to enhance revenue collection."​

 

[Saif]

FY26 budget: Govt to cut spending

The interim government is going to bring about major changes in the national budget by squeezing expenditure for the forthcoming financial year of 2025-26 because of resource crunches, said officials.

www.newagebd.net

FY26 budget: Govt to cut spending
Shakhawat Hossain 15 April, 2025, 23:15

The interim government is going to bring about major changes in the national budget by squeezing expenditure for the forthcoming financial year of 2025-26 because of resource crunches, said officials.

It may announce a downsized outlay of Tk 7.9 lakh crore to reduce dependency on borrowing to meet budget deficit.

Before ousting from power in the face of a mass uprising on August 5, 2024, the Awami League government had announced a Tk 7.97 lakh crore budget for FY25.

However, in March 2025, the interim government revised down the overall layout to Tk 7.4 lakh crore after a cut in the annual development programme by Tk 49,000 crore to Tk 2.16 lakh crore from initial Tk 2.65 lakh crore.

A trimmed ADP of Tk 2.3 lakh crore is likely to be taken for FY26, dropping unnecessary and politically motivated projects, said the officials, referring to the decisions made at an online meeting of the coordination council on macro-economy and resource management on Tuesday.

Education, health and social safety net programme are likely to be major thrust areas with a view to presenting a realistic budget, added the officials.

Presided over by finance adviser Salehuddin Ahmed, the meeting decided to keep the budget size as well as its deficit at a tolerable level.

Officials attending the meeting said the latest projections about the forthcoming national budget were varied significantly from the ones made in the previous coordination council meeting in December 2024.

The interim government had planned to announce an expansionary budget of Tk 8.48 lakh crore with a gross domestic product growth rate at 6 per cent.

But Tuesday’s meeting, which was attended, among others, by planning adviser Wahiduddin Mahmud and commerce adviser Sk Bashir Uddin, decided to project the GDP growth rate at 5.5 per cent, said the officials.

Inflation which has been hovering at 9 per cent is likely to be projected at 6.5 per cent, added the officials.

The officials observed that considering the overall high inflation in FY25, the next budget would not be expansionary in real term.

The ousted Awami League regime in its last budget of the 15-year rule aimed at achieving 6.75 per cent GDP growth and keeping inflation at 6 per cent.

Citing the 90-day pause on United States-imposed reciprocal tariffs, Tuesday’s meeting had a little discussion over the tariffs and their impacts on the country’s overall exports.

The finance adviser is expected to announce the national budget for FY26 on June 5 in a televised programme in the absence of a parliament.

He has already stated on a number of occasions that the new budget would be a realistic one, leaving footprints for an elected government to follow.​

 

[Saif]

Interim govt to announce budget 2 June

Breaking with tradition, the interim government has decided to announce the national budget on 2 June. This decision was made during a meeting of the Coordination Council on Financial, Monetary and Exchange Rate Affairs and the Asset Management Committee held at the Secretariat on Tuesday.

en.prothomalo.com

Interim govt to announce budget 2 June
Special Correspondent Dhaka
Published: 16 Apr 2025, 16: 15

Finance adviser Salehuddin Ahmed. File photo

Breaking with tradition, the interim government has decided to announce the national budget on 2 June.

This decision was made during a meeting of the Coordination Council on Financial, Monetary and Exchange Rate Affairs and the Asset Management Committee held at the Secretariat on Tuesday.

The meeting was chaired by the finance adviser, Salehuddin Ahmed, according to sources present at the meeting.

This will be the budget of the interim government led by Professor Muhammad Yunus.

Traditionally, the budget of Bangladesh is presented in parliament on a Thursday in June each fiscal year. But the budget for the 2025-26 fiscal year is scheduled to be announced on Monday.

It is anticipated that the proposed budget will amount to Tk 7.9 trillion (790,000 crore).

The budget will be announced before the Eid-ul-Azha holidays. The holidays are expected to start from the second week of June.

In keeping with tradition, the finance adviser will hold a post-budget press conference the following day, as confirmed by sources within the Ministry of Finance.

The original budget for the current (2024-25) fiscal year stood at Tk 7.97 trillion. Accordingly, the upcoming budget may be approximately BDT 70 billion (7,000 crore) lower than that of the current fiscal year.

As there is no national parliament, finance adviser Salehuddin Ahmed will present the upcoming budget via a televised broadcast.

The budget will be declared through a Presidential Ordinance.

In accordance with customary procedure, finance ministers of political governments present the budget in parliament; however, given the absence of a political administration, this will not take place this year.​

 

[Saif]

FY26 BUDGET: Task force’s advice, safety net, inflation in focus

The national budget for the 2025-26 financial year will accommodate major recommendations made by a task force on economy to tame inflation and expand the social safety net by bringing about major changes in the public spending and...

www.newagebd.net

FY26 BUDGET: Task force’s advice, safety net, inflation in focus
Shakhawat Hossain 24 April, 2025, 23:29

The national budget for the 2025-26 financial year will accommodate major recommendations made by a task force on economy to tame inflation and expand the social safety net by bringing about major changes in the public spending and resource mobilisation, said finance ministry officials.

The interim government formed the task force as part of its efforts to bring the country’s economy back on track after the autocratic Awami League regime, which was ousted in a mass uprising on August 5 past year, sent the economy into tailspin, they said.

The task force on January 30 submitted its report titled ‘Re-strategising the economy and mobilising resources for equitable and sustainable development’ with a host of recommendations on the national budget which suffered immensely due to corruption, inefficiency and wastage of resources during the Awami League regime.

The finance ministry officials said that directives had already been given to all ministries and divisions through a circular to follow the basic principles and task force’s recommendations to set up the projections on resource mobilisation and expenditure.

The other principles include poverty reduction, human resource development, mitigating the climate change, maximum uses of resources and keeping balance between the growth in gross domestic product and the overall budget outlay, they said.

Centre for Policy Dialogue executive director Fahmida Khatun termed the Finance Division’s moves positive against the backdrop of the shortage of resources because of a chronic revenue shortfall.

Things are moving towards right directions, said the CPD executive director, also a member of the task force, referring to recent reports that the interim government is likely to announce a downsized outlay of Tk 7.9 lakh crore for the FY26 to reduce dependency on borrowing to meet budget deficit.

The AL regime in its last budget had announced a Tk 7.97 lakh crore budget for FY25, but the interim government revised down it to Tk 7.4 lakh crore, slashing the annual development programme to Tk 2.16 lakh crore from initial Tk 2.65 lakh crore.

One of the major recommendations of the task force led by former Bangladesh Institute of Development Studies director general KAS Murshid was the maintaining of fiscal discipline.

‘The fiscal policy must be aligned with the monetary policy to manage expectations about inflation. If the government runs large fiscal deficits and borrows excessively, the situation can lead to higher inflation expectations, as people fear that an excessive money supply growth will drive up prices,’ according to the report by the task force.

Former World Bank Dhaka office chief economist Zahid Hussain termed the task force recommendation correct since the expansionary fiscal measures by the immediate past political regime made the contractionary monetary policy ineffective.

High inflation has become entrenched in recent years, he said.

The annual average inflation is expected to accelerate to 10.2 per cent in FY25, from 9.7 per cent in FY24 and 9 per cent in FY23, said the Asian Development Bank in its recent outlook regarding Bangladesh.

To offset inflationary pressure on majority of the people, the task force recommended prioritising poverty reduction-focused programmes such as old-age allowances, disability benefits, mother and child benefit schemes, and food security interventions targeting poor and vulnerable groups.

Terming the social protection allocations inflated because of the presence of pension for retired government employees and their families, savings certificate interest assistance and procurement of equipment for search, rescue operation and emergency communication for earthquake and other disasters among the list of 24 in the funds, the task force called for maintaining international standard to operate social security programme.

The Finance Division set side 2.5 per cent of the GDP and 17 per cent of the national budget on social protection spending in the national budget for FY25.

However, when the programmes under the list are excluded, the allocation drops to only 1.2 per cent of the GDP and 7 per cent of the budget, said the report.

The World Social Protection Report 2024–26, published by the International Labour Organisation estimated that Bangladesh spent just 0.9 per cent of its GDP on social protection, which is markedly below the South Asian regional average of 3.8 per cent as well as the averages of 4.2 per cent and 8.5 per cent for lower-middle-income and upper-middle-income countries respectively.

The task force focused on the annual development programme, saying that the policy priority for the government would be to set its size at a manageable level and seriously address the capacity constraints and inter-agency and aid coordination problems.

It also suggested the separation of tax policy and operational services of the National Board of Revenue, automation of the collection system of taxes and levies, abolishing zoning system and capacity building of the NBR among the resource mobilising steps.

The country’s tax revenue as a percentage of the GDP has been declining, hitting 8.6 per cent in 2022-23, the lowest in South Asia. The low tax-GDP base has been concerning as the resource shortfall prevented the successive governments from higher spending on important sectors like education, health and social safety net.

The introduction of bonds in the future has also been suggested by the task force to meet the financing with the country’s graduation from the least developed countries’ bloc in 2026.

Fahmida said that some of the recommendations should be implemented on the short-term basis while the others on the mid- and long-term basis.​

 

[Saif]

We will focus on revenue generating initiatives in next budget: NBR chairman

National Board of Revenue (NBR) Chairman Md Abdur Rahman has hinted at tough fiscal measures in the upcoming budget aimed at boosting revenue collection. While addressing a seminar in Dhaka on Tuesday, the NBR chairman said both the chief adviser and finance adviser had instructed the formulation

thefinancialexpress.com.bd

We will focus on revenue generating initiatives in next budget: NBR chairman
FE ONLINE DESK
Published :
Apr 29, 2025 21:22
Updated :
Apr 29, 2025 21:22

National Board of Revenue (NBR) Chairman Md Abdur Rahman has hinted at tough fiscal measures in the upcoming budget aimed at boosting revenue collection.

While addressing a seminar in Dhaka on Tuesday, the NBR chairman said both the chief adviser and finance adviser had instructed the formulation of a practical and realistic budget, according to UNB.

“We will focus on revenue-generating initiatives, shunning the expenditures,” he said.

He assured the people of implementing all laws properly so that people do not feel that they are harassed.

The seminar titled Macroeconomic Partnership and Fiscal Measures was held at the Economic Reporters’ Forum (ERF) auditorium. Policy Exchange Chairman and CEO Dr Mashrur Reaz presented the keynote paper at the seminar. ERF President Doulot Akter Mala and General Secretary Abul Kashem also spoke at the event.

Stressing the importance of revenue generation, the NBR chairman warned of broader economic consequences if collection targets were not met.

Md Abdur Rahman added that splitting the NBR into two separate divisions—Revenue Management Division and Revenue Policy Division—would be challenging, although the government has finalised the plan.

The NBR chairman expressed hope about resolving issues with the International Monetary Fund (IMF), paving the way for the release of the third and fourth tranches of the $4.7 billion loan programme.

“They (IMF) are pressing us to open the exchange rate, in lieu we are placing various types of formulas, the discussion is on, we are hoping to get a good result,” he said.

He said the recent engagements with the IMF were positive and the lending agency provided several recommendations.

“We accept many of those, and what is not possible for us to take we resist them,” he said.

Abdur Rahman Khan also acknowledged that in some areas Bangladesh could not reach a consensus.“ Negotiation is going on, may be we could reach in to agreement,” he said.​

 

[Saif]

Dilemmas foreshadow budget making for funding holdback

Finance officials seem in dilemmas crafting the upcoming fiscal budget with uncertainty overshadowing budget-support credits worth some billion dollars from foreign development financiers, as IMF lending stays in holdback. Officials say initially they had planned to enhance net foreign borrowings

thefinancialexpress.com.bd

Budget-support credit worth $3.0b looks uncertain
Dilemmas foreshadow budget making for funding holdback

IMF naysay may echo thru other development partners

Syful Islam
Published :
May 10, 2025 00:17
Updated :
May 10, 2025 00:17

Finance officials seem in dilemmas crafting the upcoming fiscal budget with uncertainty overshadowing budget-support credits worth some billion dollars from foreign development financiers, as IMF lending stays in holdback.

Officials say initially they had planned to enhance net foreign borrowings for financing the 2025-26 budget compared to the current budget. Some US$3.0 billion in budget support from the pipeline was expected be available soon, amid an indication that in the next fiscal year the country also may get a significant amount as budget support from the development partners.

However, with the International Monetary Fund (IMF) showing restraint from releasing fourth and fifth tranches of a $4.7-billion lending programme, amounting to some $1.3 billion, Finance Division officials are now not certain whether or not the other development partners will extend their budget support.

"We are now not confident about getting the IMF's budget-support loan as the differences are not narrowing," a senior finance ministry official told the FE, as long-drawn negotiations ended sans deals.

If the IMF does not agree to release the tranches, he feels, the other development partners also may turn their back to Bangladesh. The bilateral and multilateral development partners usually follow IMF assessment before extending any financial support to any country.

According to the finance officials, presently, apart from IMF's $1.3 billion, there is a sum of $500 million from the World Bank, $500 million from the Asian Development Bank, 400 million from the Asian Infrastructure Investment Bank (AIIB), and $250 million from Japan International Cooperation Agency (JICA) as budget support in the pipeline.

In the current fiscal budget, the net foreign-borrowing target was set at Tk 907 billion which the budget officials had planned to enhance to Tk 1.0 trillion in the upcoming budget, sources said.

On the contrary, the budget officials were planning to lower borrowing from domestic sources to Tk 1.4 trillion in the next fiscal year from Tk 1.609 trillion in the outgoing one to help higher fund flow for private-sector investment.

However, with the changed financial scenario, officials involved in budget preparation are now in a quandary as to how to finance the next budget without harming private-sector investment if budget-support loans are not given by the development partners in the few days left before the new budget rollout.

On return from the spring meetings of the IMF and the World Bank late April, Finance Adviser of the interim government Dr Salehuddin Ahmed said: "IMF doesn't agree to pay the budget-support credit, we will prepare budget on our own."

The government has already decided to trim the size of coming budget compared to the current one taking into consideration the trend of financing from home and abroad.

Dr Zahid Hussain, a former lead economist at the World Bank's Dhaka office, says unless the government gets budget credits amounting to some $3.0 billion from the development partners, they will have to cut expenditure by any means or enhance revenue collection.

He thinks achieving the big revenue-earning target the government is setting for next fiscal year will be "largely impossible".

Also, Mr Hussain foretells, unless budget-support credit is available, the government will have to depend on project aid which is only available based on project implementation.

"In that case, the government will have to depend on financing from domestic sources that means banking sector only to dry-out funds for private-sector investments," he told The Financial Express.

Mr Hussain feels this was the high time the government made the exchange rate fully market- dependent.

He mentions that the governor has recently been saying that forex supply was very good, demand was not strong, current-account balance was in positive territory, and everything was stable.

The economist also points out that dollar price has gone three years down on the international market while crude oil, gas, and coal prices have fallen, and commodity price is projected to tumble by 12 per cent in 2025.

"Thus, there is no chance of exchange-rate volatility if the control is lifted," he says, adding, "As everything is stable, the government should have taken the chance and met the IMF's requirement."​

 

[Saif]

NATIONAL BUDGET FY26: Cash subsidy on exports to be slashed by Tk 1,000 crore

The government is likely to cut down on the cash incentive on exports by more than Tk 1,000 crore in the new financial year of 2025–26.

www.newagebd.net

NATIONAL BUDGET FY26: Cash subsidy on exports to be slashed by Tk 1,000 crore
Staff Correspondent 10 May, 2025, 22:32

The government is likely to cut down on the cash incentive on exports by more than Tk 1,000 crore in the new financial year of 2025–26.

Finance ministry officials said that Tk 8,000 crore was likely to be earmarked for cash subsidy to the exporters in the new budget to be announced on June 2.

The outgoing FY2024–25 budget kept Tk 9,025 crore for the same purpose.

Finance ministry officials said that this would be the second year in a row that they were reducing cash subsidies on exports as per the government policy to phase it out in near future.

Bangladesh will not be able to provide cash subsidies to the exporters once it is graduated from the least developed countries’ bloc in November 2026 as per the World Trade Organisation rules.

Ministry officials also said that exporters would be compensated for the losses of cash subsidy with policy support, such as, rebate on power bills, banks loan facilities and improving the ease of doing business.

The country is also trying to sign Free Trade Agreements with various countries to boost trade and economic cooperation in a bid to strengthen its LDC graduation.

Bangladesh has agreed to finalise a FTA with Singapore by the end of 2026, while negotiations are also underway for FTAs with China and Japan.

At present, 43 export items get cash incentive.

Ministry officials further said that the number of the items getting the cash incentives was likely to remain the same, while the rate would be slashed.

At present, cash assistance on the export earnings of apparel makers in all markets is 0.30 per cent.

The cash subsidy for entering into new markets is 2 per cent.

Agro products, potatoes and processed meat exporters enjoy 10 per cent incentive on export earnings, the highest among all sectors.

The government is providing 6 per cent case incentives on crust leather export.​

 

[Saif]

The upcoming budget should deliver economic stability

Controlling inflation should be a top priority for the interim government.

www.thedailystar.net

The upcoming budget should deliver economic stability

FILE ILLUSTRATION: REHNUMA PROSHOON

As Bangladesh approaches the fiscal year (FY) 2025-26, the country stands at a critical juncture. The interim government is set to unveil a new national budget, which is expected to reflect both the pressing need for economic stabilisation and structural reform. With the economy grappling with high inflation, low revenue mobilisation, rising unemployment, persistent inequality, and the impending graduation from Least Developed Country (LDC) status, the upcoming budget is poised to address these multifaceted challenges.

The formulation of the FY2025-26 budget occurs against a backdrop of significant economic and political upheaval. The ousting of the previous government in August 2024, following mass protests, led to the establishment of an interim administration on August 5, 2025, tasked with steering the country through turbulent times.

This is reflected in the World Bank's revised economic growth forecast for Bangladesh which dropped to 3.3 percent growth of Gross Domestic Product (GDP) for FY2024-25, marking the lowest rate in 36 years. This reduction is attributed to high inflation, reduced investment, a weak financial sector, and political instability. As of April 2025, the point-to-point inflation rate stood at 9.17 percent, with a 12-month average of 10.21 percent. Although this reflects a decline from last month's 9.35 percent (point-to-point) and 10.26 percent (12-month average) respectively, inflation is still high, persisting for almost three years now. To combat inflation, the central bank has maintained a tight monetary policy, keeping the policy rate at 10 percent. These economic challenges are compounded by the upcoming graduation from LDC status in 2026, which will result in the loss of various flexibilities, including the loss of preferential market access for Bangladeshi products in developed and some developing country markets and access to finance at flexible terms.

Amid these challenges, exports have shown resilience. Export receipts during October-December 2024 increased by 5.1 percent compared to July-September 2024 and by 20.2 percent compared to October-December 2023. This is due to increased export receipts from readymade garments, jute and jute manufacturers, and fish and shrimps. Despite these gains, the readymade garment sector could face headwinds due to new US tariffs and shifting global demand, potentially impacting future export performance.

In a departure from previous expansionary budgets, the interim government plans to present a contractionary budget totalling Tk 7.90 lakh crore for FY2025-26, down from Tk 7.97 lakh crore in the current FY2024-25. This reduction reflects a strategic shift towards fiscal prudence in response to mounting economic pressures. The projected budget deficit is expected to be equivalent to about 4.6 percent of GDP. To finance this deficit, the government plans to rely on a combination of foreign borrowing, bank loans, and savings certificates. Over half of the deficit is expected to be covered by external sources. The government will have to be cautious in bank borrowing as it will increase its debt burden. Besides, funds should be available to the private sector whenever needed.

One of the challenges, as in the previous years, will be the financing of the budget from domestic sources as Bangladesh's tax-to-GDP ratio remains one of the lowest globally, which is below 8 percent according to government data. This significantly constrains the government's fiscal capacity. To address this, the National Board of Revenue (NBR) has set a revenue collection target of Tk 4.99 lakh crore for FY2025-26. The government plans to broaden the application of the standard 15 percent value-added tax (VAT) rate and reduce tax exemptions. The government aims to generate additional revenue through new tax measures and administrative improvements. However, for efficient and enhanced tax collection, the government must initiate several reforms. Key initiatives to enhance revenue mobilisation include the separation of tax policy and administration within the NBR to reduce conflicts of interest and improve efficiency. Automation of NBR and skilled human resources are other necessary measures. Without deep reform measures, tax evasion cannot be controlled. Therefore, sufficient resource allocation should be made to enhance the institutional capacity of the NBR.

Controlling inflation should be a top priority for the interim government. The new budget plans to reduce inflation to 6.5 percent by the end of FY2025-26. To achieve this, fiscal and monetary policies must be aligned. Fiscal policy should be designed in a way that ensures adequate allocations are made to priority sectors while pursuing a contractionary fiscal policy. Fiscal prudence should be ensured by avoiding excessive borrowing from the banking sector. To control inflation, the government should also closely monitor markets, investigate market manipulation, and enforce anti-trust laws with a zero-tolerance policy to prevent price gouging and ensure fair competition. The allocation for social safety net should be increased to protect vulnerable people.

In the current context, the general population expects a budget that addresses their immediate economic hardships, particularly high inflation and unemployment. There is also a strong desire for increased transparency and accountability in government spending, as well as effective implementation of development projects. The public also expects the government to take decisive action against corruption and inefficiency, which have historically plagued budget execution. The interim government is in an advantageous situation to set an example by raking such action since this government has no electoral compulsion.

The FY2025-26 budget presents a critical opportunity for Bangladesh to recalibrate its fiscal policies and lay the groundwork for sustainable economic growth. By focusing on revenue mobilisation, inflation control, and strategic investments in key sectors, the interim government can navigate the current economic challenges and set the stage for a more resilient future. The success of this budget will depend on the government's commitment to transparency, accountability, and the effective implementation of its proposed measures.

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

 

[Saif]

Govt’s bank borrowing target may shrink in next budget

The government is planning to significantly reduce its bank borrowing target in the upcoming fiscal year as it aims to narrow the budget deficit by scaling down the overall budget size.

www.thedailystar.net

BUDGET FOR FY26

Govt’s bank borrowing target may shrink in next budget

The government is planning to significantly reduce its bank borrowing target in the upcoming fiscal year as it aims to narrow the budget deficit by scaling down the overall budget size.

The target is set to be slashed by nearly 25 percent in the budget for FY26, dropping to Tk 104,000 crore.

The budget deficit for the outgoing fiscal year is also likely to shrink by around Tk 30,000 crore to Tk 226,000 crore, according to a finance ministry official.

To manage the deficit in the upcoming budget, the government is expected to rely more on foreign borrowing rather than domestic sources, especially banks, as interest rates on foreign loans are comparatively lower.

The slow implementation of the Annual Development Programme (ADP) in the current fiscal year and efforts to curb inflation are also expected to contribute to a reduced bank borrowing target.

To manage the deficit in the upcoming budget, the government is expected to rely more on foreign borrowing rather than domestic sources

As a result, the national budget for FY26 is projected at Tk 790,000 crore -- Tk 7,000 crore less than the original budget for the current year, which would mark the first time in recent memory that the overall budget would see a contraction.

Zahid Hussain, a former lead economist at the World Bank's Dhaka office, said the government's move to reduce bank borrowing is linked to its lower deficit target.

"Bank borrowing should be reduced because if the government takes a large portion of available credit, the private sector won't have enough access to loans," he added.

The interest rate on treasury bonds and bills is currently very high. If banks have a greater opportunity to lend money to the government, they will be less inclined to invest in the private sector, he said.

"We will not implement the budget by borrowing from banks or printing money. This budget will be implementable," Finance Adviser Salehuddin Ahmed told journalists yesterday after a meeting of the advisory committee on public procurement.

He also said the upcoming budget would not have a large deficit, adding that the government would refrain from borrowing to finance mega projects.

Aided by bank borrowing, budget sizes have ballooned in recent years despite low revenue collection.

Total outstanding domestic borrowing stood at Tk 942,507 crore as of January 2025, up from Tk 722,591 crore in June 2021.

The government is set to borrow Tk 125,000 crore from domestic sources, including both banks and non-bank institutions in FY26. Of this, Tk 21,000 crore is expected to come from non-bank sources, such as savings instruments and treasury bond sales to corporates and individuals.

Even in the current fiscal year, the borrowing target was revised to Tk 117,000 crore from Tk 160,900 crore in the original budget due to low ADP implementation and the adoption of a tight fiscal policy.

Of this, bank borrowing was revised down to Tk 99,000 crore from the original Tk 137,500 crore.

However, bank borrowing stood at Tk 15,531 crore in the first seven months of the current fiscal year, falling far behind the revised target due to low ADP implementation.

Contrary to recent years, the government has not borrowed from the central bank during this period. Instead, it repaid Tk 59,486 crore.

"This is called quantitative tightening, which supports the implementation of a contractionary monetary policy and helps reduce inflation," Hussain said.

The government also repaid more than it borrowed from savings instruments during the same period. Sales of savings instruments stood at Tk 36,463 crore, while repayments against the principal amounted to Tk 43,476 crore.

Hussain said this was due to a decline in people's savings, driven by high inflation.

The government borrowed Tk 31,625 crore from treasury bills and bonds in the last seven months.

"This trend will be instrumental in introducing a secondary bond market," Hussain added.

However, the government's borrowing from commercial banks reached Tk 75,018 crore as of January this year.​