Economic strain, tough choices

The BNP-led new government is preparing its first national budget under severe fiscal constraints, with officials scaling back spending plans amid weak revenues, inflationary pressure and global uncertainty. 

While expectations are high for a large, reform-driven package, internal documents show a more cautious approach is now taking shape.

The economy is under strain, with households feeling the pinch of persistent inflation and an unstable global outlook. Against this backdrop, the budget for upcoming fiscal year 2026-27 (FY27) is being drafted within tight limits, forcing a rethink of earlier expansion plans.

According to initial Finance Division projections, the total budget size was set at Tk9,30,000 crore. However, that figure is now being revised down in light of external shocks, including the Middle East conflict, and subdued revenue prospects. 

The Planning Commission is now considering an Annual Development Programme (ADP) of around Tk3,00,000 crore, while the revenue target is likely to be set near Tk7,00,000 crore. Inflation is expected to be targeted at around 7.5%, with GDP growth set at approximately 6.5%.

These figures were presented in budget documents at a meeting of the government’s Coordination Council on fiscal, monetary and exchange rate matters.

Despite fiscal constraints, the budget is expected to carry a strong political imprint. As the first full budget of the new administration, it is likely to introduce welfare schemes including Family Card, Farmer Card and Health Card. 

Officials also expect a clearer outline of a new pay structure for government employees, alongside broader institutional reforms and a development roadmap aimed at improving living standards.

The scale of the upcoming budget marks a dramatic shift compared with historical benchmarks. 

The last full budget under a BNP-led government was in FY07, amounting to Tk69,740 crore, focused on poverty reduction, infrastructure and tax base expansion without increasing pressure on citizens. 

Nearly two decades later, the party is now set to present a full budget on 11 June, with the overall size projected to be more than Tk8,00,000 crore higher than that earlier period.

For comparison, the current FY26 budget stands at Tk7,90,000 crore, down Tk7,000 crore from the previous year. The revised budget was further trimmed to Tk7,88,000 crore. 

While budgets in Bangladesh typically expand by 12%-15% annually, the upcoming proposal may cross Tk9,30,000 crore – around 25% higher than the current fiscal year.

On this basis, the fiscal deficit could reach Tk2,35,000 crore. Financing plans include Tk1,16,000 crore in external borrowing and Tk1,19,000 crore from domestic sources.

Economists say inflation remains the most urgent macroeconomic challenge. 

They warn that pressures are being driven not only by domestic demand but also by global instability. The policy challenge, they argue, is balancing investment and job creation with inflation control and fiscal discipline.

AB Mirza Azizul Islam, former caretaker government adviser, said, “The success of the budget depends more on implementation capacity than allocation size.” 

He highlighted weak project execution as a major challenge, noting that delays in development projects have become common, increasing costs and delaying benefits. Strengthening planning, implementation, and monitoring is therefore essential.

He added, “High inflation continues to strain ordinary people. To ease this, stronger market management, improved supply chains, and policy interventions where necessary must be clearly outlined in the budget.”

“At the same time, a more investment-friendly environment is needed by reducing policy complexities, simplifying approval processes, and removing barriers faced by entrepreneurs. Measures to restore confidence and attract both domestic and foreign investment are also essential.”

Zahid Hussain, former lead economist of World Bank’s Dhaka office, warned that reliance on borrowing or monetary expansion would carry risks.

“Without increasing revenue, a large budget would rely either on bank borrowing or money printing – both risky options that could harm the private sector and fuel inflation,” he said.

“A key concern in the proposed budget is how to mobilise the required funds given fiscal constraints. Therefore, rather than being purely expansionary or contractionary, a balanced, efficient, and sustainable budget is now most necessary,” he told the Daily Sun.

GDP projections and inflation trends

The size of the economy is projected at Tk68,00,316 crore for the upcoming budget. For the current fiscal year, GDP was initially estimated at Tk62,44,500 crore, later revised down to Tk61,21,910 crore.

GDP growth is expected to be set at 6.5%, while inflation is targeted at 7.5%. However, the current reality remains challenging. Data from the Bangladesh Bureau of Statistics shows inflation stood at 8.71% in March, down from 9.13% in February.

Officials in the Finance Division said the overall framework has been finalised by the Coordination Council, but revisions remain possible under the new political setup. Ministries are currently preparing their spending proposals within the existing ceiling, though allocations may be reshaped.

Development spending and priorities

Development expenditure is also set to rise sharply. The ADP may reach Tk3,00,000 crore – Tk70,000 crore higher than the proposed figure for the current year and Tk1,00,000 crore above the revised ADP.

Funding is expected to come from Tk1,90,000 crore in domestic resources and Tk1,10,000 crore from external sources.

The budget is expected to prioritise welfare schemes such as family cards and farmer cards, in line with the government’s election manifesto. 

Other priorities include skills development, job creation at home and abroad, higher growth, food security through agricultural support, healthcare expansion, financial sector discipline and regulatory reform to ease investment barriers.

There is also an emphasis on expanding the “creative economy”, including film, music, sport and rural culture. 

The government has already begun recruiting sports and music teachers in primary schools and introducing incentives for athletes.

Fulfilling election commitments

The government aims to bring 50 lakh families under the family card scheme in the next fiscal year. 

Farmer cards are expected to be issued to genuine farmers, fishers and livestock owners. Low-income households are already receiving Tk2,500 per month, with Tk9,600 crore allocated for social safety net programmes.

Under the “Notun Kuri” sports initiative, talented athletes aged 12-14 will receive scholarships. 

Additional spending will also be required for public sector pay adjustments and job creation, with an estimated Tk1,00,000 crore earmarked for these areas.

Officials say the broader ambition is to move towards building a $1 trillion economy by 2034. 

Despite external shocks, including geopolitical tensions in the Middle East, policymakers acknowledge there is limited room to cut spending significantly. 

The emphasis, they say, will be on prioritising essential expenditure while eliminating waste and improving efficiency.