A ‘Humane Economy’ Caught in an Arithmetical Trap

Budgets delivered in the immediate wake of historical ruptures are rarely just exercises in accounting; they are political manifestos written in numbers. Confronted with the task of steering Bangladesh past fifteen years of institutional erosion and the immediate trauma of a mass uprising, Finance Minister Amir Khosru Mahmud Chowdhury stepped up to the dispatch box on Thursday to deliver a fiscal blueprint that tries to perform a high-wire act. His Tk9.38 lakh crore national budget for the 2026-27 fiscal year (FY27) – the 55th in the country’s history – is an audacious gamble: it attempts to fundamentally reshape the country’s social contract through an unprecedented surge in human capital spending, even as the macroeconomic foundations beneath it fracture under the weight of toxic bank debt and severe global energy shocks.

Titled “Journey Towards a Democratic, Humane, and Inclusive Economy,” this first fiscal plan by a Bangladesh Nationalist Party (BNP) administration in two decades is 19% larger than the original layout of the outgoing year, consuming 13.7% of projected GDP. Under the close watch of Prime Minister Tarique Rahman, the administration has set twin targets that look beautiful on paper: pulling point-to-point inflation down from May’s bruising 9.42% to a stable 7.5%, while accelerating economic growth to 6.5%. To sustain this momentum, the government has anchored its long-term ambitions to a phased “3R Strategy” (Recovery, Restoration, and Reconstruction), aiming to build a $1 trillion economy by 2034. Yet, for all its structural elegance, the document is caught in a classic fiscal trap – promising Scandinavian-style social infrastructure while relying on a financial sector that is structurally broken.

The poetry of reform

To give the finance minister his due, the budget contains some of the most forward-looking, supply-side thinking seen in Dhaka for a generation. For years, economists have criticised the previous regime’s obsession with hard, debt-heavy “vanity projects” that offered high avenues for leakage but low immediate returns for ordinary citizens. This budget shifts the state’s focus back to its people, treating human development as economic infrastructure.

The most sweeping manifestation of this philosophy is a historic realigned allocation for education and healthcare. The combined funding for these two sectors has surged by nearly 63%, reaching Tk185,347 crore, up from Tk113,921 crore in the revised budget. This positions their joint share at an unprecedented 19.8% of total public spending.

Education: Slated to receive Tk122,495 crore (a 42.7% year-on-year increase), the framework prioritises substance over brick-and-mortar upgrades. The money is directed toward mandatory technical and vocational training from Class VI onwards, a nationwide expansion of the Mid-Day Meal Programme, and the “One Teacher, One Tab” initiative to bridge the widening digital divide between rural schools and urban centres.

Health: Receives a long-overdue injection to Tk62,852 crore – more than doubling its previous baseline. The funds are earmarked for universal vaccine supplies, the modernisation of specialised district hospitals, and the deployment of digital e-health cards to streamline low-income care.

Beyond social spending, the document shows a keen understanding of global supply chains and regulatory friction. In a bid to unlock private investment, the government has announced a mandatory online single-window system that legally guarantees the issuance of business licenses within seven days. If enforced, this could strip away layers of bureaucratic rent-seeking that have long choked local entrepreneurs.

Similarly, the budget places a smart bet on technological diversification to move the economy away from its dangerous over-reliance on low-margin readymade garment (RMG) exports. To court global technology firms, semiconductor and chip-design operations will enjoy a concessional 1% import duty on machinery until 2031, coupled with total exemptions from VAT, regulatory duties, and supplementary duties. To deepen the digital ecosystem, the state has also entirely abolished the Tk300 tax on mobile SIM cards – sacrificing Tk1,200 crore in immediate annual revenue to lower the entry barriers for financial inclusion in rural segments. This is matched by aggressive tax slashes on electric vehicle (EV) imports and zero-VAT shielding for agricultural inputs like fertilisers and pesticides to insulate farmers from import costs.

The prose of reality

Yet, economic strategies are bound by the laws of arithmetic, not the aspirations of politics. When one moves past the reformist rhetoric to examine how this vast Tk9.38 lakh crore enterprise is to be financed, the optimism begins to look incredibly fragile. 

The government is projecting a fiscal deficit of Tk2,43,000 crore (3.6% of GDP). To close this gap, the finance minister intends to borrow Tk112,000 crore directly from the domestic banking system.

Herein lies the central contradiction of the budget. It is impossible to extract over a lakh crore taka from an institutional banking apparatus that is already on life support. According to official disclosures, non-performing loans (NPLs) in the banking sector hit a staggering 30.60% at the end of December 2025. This mountain of bad debt has hollowed out banks’ capital buffers and crippled their capacity to extend fresh credit, causing private-sector credit growth to plummet to a historic low of 4.7% in April.

By turning to these weakened commercial banks to bankroll its deficit, the state risks triggering a severe crowding-out effect, effectively starving private enterprises of liquidity. This aggressive state borrowing could completely run counter to the central bank’s newly announced Tk60,000 crore “Stimulus Package 2026.” Without swift, painful structural interventions to clean up bank balances and isolate toxic assets, the monetary transmission mechanism remains fundamentally clogged.

The second major vulnerability is the revenue model. The National Board of Revenue (NBR) has been tasked with bringing in a monumental Tk6,04,000 crore – a 17% scale-up from the outgoing year. To expect such a performance from an under-digitised tax administration that was already Tk1 lakh crore short of its target by April requires an extraordinary leap of faith. The proposal to make Tax Identification Number (TIN) certificates mandatory for opening bank accounts is a valid structural tool to capture unregistered wealth across the country’s 17.79 crore bank accounts, but the short-term administrative capacity needed to execute this dragnet without driving capital into the informal cash economy is entirely unproven.

Exacerbating these domestic strains is a deeply unforgiving external environment. The closure of the Strait of Hormuz amid widening Middle Eastern conflicts has dealt a brutal blow to the exchequer, adding $3 billion to Bangladesh’s energy import bill in just four months. This has forced the central bank to keep its short-term policy interest rate high at 10% to anchor inflation expectations, consequently driving up borrowing costs for legitimate businesses.

Furthermore, while the transition to a market-based exchange rate regime has stabilised the Taka near Tk122 against the US dollar, it has triggered a brutal depreciation of 18%-20% against the Euro and the Pound Sterling, alongside losses against the Chinese Yuan. Because Bangladesh’s manufacturing core relies on raw materials imported from China and Europe, this currency slide acts as a persistent machine of cost-push inflation, threatening the government’s 7.5% price ceiling from day one.

Finally, the budget delivers a sobering piece of institutional realism: the government has formally requested a three-year deferral of its transition from Least Developed Country (LDC) status. While this is a highly pragmatic move to protect duty-free market access for exporters, it sits uncomfortably alongside the document’s highly optimistic medium-term projections, which predict that gross foreign exchange reserves will miraculously scale from the current $31.17 billion up to $41.01 billion in FY27, and onwards to $62.64 billion by FY29. In an era of trade fragmentation, such flawless performance leaves zero margin for error.

Execution is the ultimate currency

Amir Khosru Mahmud Chowdhury deserves credit for breaking with the past and designing a budget that treats public health, educational competence, and micro-regulatory deregulation as the real building blocks of a competitive nation. The long-term incentives for semiconductor manufacturing and the zero-tax shielding for agriculture are precisely the kinds of structural policies a modern economy requires.

Yet, a budget is only as strong as the financial system that funds it. If the state attempts to pull Tk1.12 lakh crore out of a banking sector weighed down by 30.6% non-performing loans, it risks choking off the private investment needed to achieve its 6.5% growth target. The transition from the inspiring poetry of a political uprising to the hard prose of governance requires more than setting ambitious goals; it requires administrative muscle. To prevent this imaginative blueprint from dissolving into a fiscal mirage, the new administration must move with absolute urgency to enforce bank accountability, digitise the tax apparatus, and implement its deregulation promises with clinical precision. In today’s volatile economic reality, execution is the only currency that matters.
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The writer is Deputy Editor, Daily Sun. Email: [email protected]