The first budget of the new government for the 2026-27 fiscal year is likely to exceed the Tk900,000 crore mark, as the government moves to fulfil its electoral pledges. Nineteen years ago, BNP’s national budget was Tk69,740 crore for fiscal year 2006-07. Despite the increase in size, the budget-to-GDP ratio has not changed much over the years. In 2006-07, the budget stood at around 12.68 percent of GDP and is set to be 13.6 percent in FY2027. It seems that the economy has grown significantly in size, but the government’s fiscal capacity has not strengthened at a comparable pace.
The economy is now in a volatile stage. Current economic troubles are signs of structural weaknesses that have accumulated over the years. The economy is trapped in a prolonged crisis. It is now going through a difficult period marked by slower growth, rising poverty, weak private investment, and declining confidence in the banking sector. Restoring investor confidence, improving governance, and increasing productive investment should now be the priority.
The FY27 budget will need to address multi-dimensional challenges. The government inherited significant economic difficulties that cannot be ignored while preparing the budget. At the same time, it must fulfil election pledges related to healthcare, education, social protection, and employment generation. The next budget must avoid unrealistic promises and instead focus on practical, targeted interventions that deliver visible relief. The flagship Family Card programme alone is expected to cost Tk13,000 crore in its first year, targeting 40 lakh families. The other promised initiatives will also require large sums, and the finance ministry plans to manage rising demands by consolidating existing social safety net schemes.
The government also decided to partially implement recommendations to raise the salaries of its employees. The Ninth Pay Commission estimated that an additional Tk106,000 crore would be required annually to fully implement the new pay structure. The government also hopefully have in mind to shield the economy from the fallout of the ongoing USA–Israel–Iran conflict.
Bangladesh historically reduced poverty when growth rates were around 4.5 percent. With growth now below 4 percent and higher poverty is again going up, people do not get jobs, and food insecurity rises. That is the natural consequence of weak growth and weak job creation, etc. Corruption, weak governance, and inefficiencies continue to undermine tax collection, depriving the government of the resources needed for public spending. Again, government would need to reprioritise spending to fulfil commitments related to education, healthcare, and social safety net programmes. The ruling party has already pledged to raise spending on health and education to 5 percent of GDP each and increase social protection expenditure to at least 3 percent of GDP. For job creation, the government should also focus on skills and a proper education system. Bangladesh’s education system suffers from a major disconnect with industry needs. Many graduates leave universities without practical skills or career preparation.
Bangladesh no longer has the fiscal space for overly ambitious spending plans. Weak revenue collection, persistent inflationary pressure, sluggish private investment and widening inequality have narrowed the government’s room to manoeuvre.
Our tax-GDP ratio has declined further, while revenue mobilisation has historically remained weak. The tax system focuses too heavily on immediate revenue collection rather than long-term economic expansion. NBR often place greater pressure on existing taxpayers rather than expanding the tax net. Without a transparent and predictable taxation structure, both local and foreign investors will continue to lack confidence. NBR is not giving due attention to form itself in making the tax system efficient. Excessive pressure on taxpayers and businesses could drive productive individuals and companies out of the country.
The challenge is more complex than simply tightening expenditure. Bangladesh must also revive private-sector investment and job creation at a time when high borrowing costs and macroeconomic uncertainty continue to discourage businesses. If private investment remains weak for a prolonged period, pressure will build on employment generation, industrial performance and inclusive growth. The real challenge is to expand direct taxation and bring more people into the tax net without putting additional burdens on lower and middle-income groups. Another challenge is weak project planning, poor coordination and a culture that values expenditure over outcomes.
The International Monetary Fund (IMF), which has withheld the next tranche of a loan programme, citing insufficient progress in key structural reforms. The key reforms are tax policy, exchange-rate management, banking sector restructuring, Bangladesh Bank governance, and separating the National Board of Revenue, which remain incomplete. The other condition is the reduction of subsidies and the adjustment of electricity prices. Experts also stressed the urgency for reforms, particularly modernising the tax system, expanding digitalisation, curbing tax evasion, and widening the scope of direct taxes without overburdening ordinary citizens.
Bangladesh is gradually losing competitiveness. It must improve logistics, reduce lead times, trade facilitaton, strengthen labour and environmental standards, and create a more investment-friendly environment. Many of the reform conditions attached to IMF loans are not new demands but long-standing recommendations that domestic economists and businesses have raised for years. All governments largely ignored these reform calls until financial pressure forced Bangladesh to seek IMF assistance. If the government can improve market management and reduce the overall cost of doing business, inflationary pressure can ease even without relying only on monetary policy. Export diversification, free trade agreements, and stronger compliance standards would become increasingly important in the coming years.
Experts also warned that the budget deficit must be kept within 4 to 5 percent to avoid unsustainable debt pressure, noting that interest payments on domestic and foreign loans have already surpassed education as the largest item in the revenue budget.
The government’s ambition to build a trillion-dollar economy by 2034 will remain out of reach without urgent meaningful reforms in banking, taxation, trade policy, investment policy, and logistics, as the country’s current economic structure is too weak to sustain the level of growth required.
The fundamental weakness is that we still treat the budget essentially as an income-expenditure ledger. A national budget should serve as a policy document for economic transformation. The government should not only focus on politically important promises but also give due attention to reforms and careful unproductive expenditure to address the country’s deepening economic vulnerabilities.
The writer is the CEO, Bangla Chemical & Legal Economist. E-mail: [email protected]
