BNP’s First Budget in 19 Years: High Expectations, Limited Capacity

After nearly two decades, Bangladesh Nationalist Party (BNP) is preparing to present a national budget once again. The upcoming 2026-27 budget, expected to exceed Tk 9.3 trillion, will not merely be an annual financial statement; it will serve as a crucial test of the new government’s economic vision, governance capacity and political judgment.

The contrast with BNP’s last budget in 2006-07 is striking. Back then, the national budget stood at Tk 697 billion under then Finance Minister M Saifur Rahman. Since then, Bangladesh’s economy has expanded dramatically, supported by industrial growth, rising remittances, infrastructure development and rapid urbanisation. Yet despite this impressive expansion, one uncomfortable reality remains unchanged: the state’s ability to mobilise revenue has failed to keep pace with the economy itself.

Two decades ago, the budget-to-GDP ratio was around 12.7 per cent. Today, despite a much larger economy, it is expected to rise only modestly to around 13.6 per cent. This reflects a structural weakness (a chronically weak tax system and a narrow revenue base) that successive governments have struggled to overcome. For developing economies like Bangladesh, many economists consider a government revenue-to-GDP ratio of at least 15-20 per cent necessary to adequately finance infrastructure, healthcare, education, social protection and public administration. The International Monetary Fund (IMF) and World Bank have often suggested that countries below roughly 15 per cent struggle to sustain long-term development spending effectively.

Meanwhile, public expectations have grown enormously. Citizens now demand uninterrupted electricity, efficient healthcare, modern education, better urban services and improved transportation networks. Mega-projects such as Padma Bridge and Dhaka Metro Rail have transformed public expectations about what the state can deliver. Naturally, people now expect more highways, more rail connectivity, more industrial zones and more public investment across the country.

But while expectations have expanded, fiscal space has narrowed.

A growing share of government expenditure is now consumed by recurrent costs, including salaries, subsidies and debt servicing. Rising interest payments on both domestic and foreign loans are placing additional pressure on public finances. Energy and food subsidies remain costly, while discussions about a new public-sector pay scale could further increase expenditure obligations. As a result, the government’s room for productive development spending is becoming increasingly limited.

The banking sector adds another layer of concern. Years of weak regulation, political influence and poor loan recovery mechanisms have resulted in mounting non-performing loans. This has weakened financial institutions and reduced their ability to support private-sector investment. At the same time, increased government borrowing from banks risks crowding out private businesses and keeping interest rates elevated.

Bangladesh’s capital market has also failed to mature into a reliable source of long-term financing. Consequently, the economy remains heavily dependent on banks and external borrowing to sustain investment and growth.

Corruption and inefficiency continue to undermine development outcomes as well. Delays in project implementation, inflated costs and allegations of mismanagement have long reduced the effectiveness of public spending. Allegations regarding large-scale capital flight during previous administrations have intensified public debate over governance and accountability. Regardless of political interpretations, concerns over corruption and illicit financial outflows remain serious obstacles to sustainable economic management.

External pressures have further complicated the situation. The Covid-19 pandemic disrupted trade, employment and production systems, while the Russia-Ukraine war triggered global increases in food and energy prices. Inflation in Bangladesh has remained persistently high since 2023, eroding household purchasing power and increasing the cost of living. Ongoing geopolitical tensions in the Middle East continue to create uncertainty in global fuel markets, posing additional risks for an import-dependent economy like Bangladesh.

Against this backdrop, the IMF’s reform programme presents both an opportunity and a challenge. The IMF has pushed Bangladesh towards reforms in taxation, banking governance, subsidy rationalisation, exchange-rate flexibility and fiscal discipline. While these reforms may strengthen macroeconomic stability over the long term, they also carry immediate political and social costs. Tax increases, subsidy cuts or tighter monetary policies are rarely popular among ordinary citizens already struggling with inflation.

The situation leaves Finance Minister Amir Khasru Mahmud Chowdhury facing a difficult balancing act. The government must decide whether to prioritise large infrastructure projects or channel more resources into healthcare, education and human capital development. It must maintain economic discipline without slowing growth, restore confidence without increasing instability and satisfy public expectations while operating within severe financial constraints.

Ultimately, the upcoming budget will be more than an accounting exercise. It will reveal whether the new BNP government can move beyond ambitious promises and demonstrate the institutional strength, policy consistency and governance reforms necessary to navigate Bangladesh through a period of economic uncertainty. The real challenge is not announcing a bigger budget but proving that the state has the capacity to finance it responsibly and implement it effectively.