The new BNP government’s maiden budget hits the right notes on economic recovery, but can they actually pull it off? While Fahmida Khatun, executive director of the Centre for Policy Dialogue (CPD), calls the roadmap “realistic,” she warns that the government’s historic Achilles’ heel – budget implementation – could still derail the whole plan.
Finance Minister Amir Khosru Mahmud Chowdhury proposed a Tk9.38 lakh crore budget for the 2026-27 fiscal year in parliament on Thursday. This includes an Annual Development Program (ADP) of Tk3 lakh crore, both figures representing the highest in the country’s history.
However, looking at the current fiscal year, only 32% of the revised Tk2 lakh crore ADP was implemented in the first nine months. To execute the newly announced budget, project implementation and spending capacity must be scaled up significantly.
“Our biggest weakness is budget implementation,” Fahmida said in an interview with Ariful Islam Mithu of TIMES of Bangladesh. “The institutional capacity needed to execute it has not yet been created. If the current institutional limitations persist, implementation will be difficult.”
When asked about the next steps, she emphasised that the government must pursue institutional reforms simultaneously with budget execution.
Regarding the budget’s strengths, the CPD executive director highlighted its focus on economic recovery. “The strongest point of this budget is the stated goal of economic recovery and restructuring, which is vital given our currently weak economic foundation. The government has successfully identified the problem and initiated steps in several areas. However, the true test lies in how effectively these measures are implemented.”
She added that the budget aims for economic stability, investment growth, and institutional reform. “Alongside growth, they want to transition toward investment-friendly and employment-based growth to move past high inflation and the financial sector crisis. This is reflected in the allocations and importance given to various sectors,” she said.
Fahmida also noted the government’s emphasis on energy security, health, education, and social safety nets.
To finance this massive budget, the finance minister has set a revenue collection target of Tk6.95 lakh crore. While Fahmida believes achieving this target will be challenging, she commended the government’s focus on modernising and reforming the tax collection system.
“They have set sector-based priorities and outlined where revenue will be collected from, alongside the steps they will take to achieve it,” she said.
Despite the historic revenue target, the budget leaves a massive deficit of Tk2.43 lakh crore.
When asked if this would create economic pressure, Fahmida clarified: “A budget deficit itself is not a problem. However, borrowing heavily from domestic banks to fund it could be. The private sector also relies on bank loans, and the government has pledged an investment-friendly environment to generate employment.”
The CPD executive director warned that if the private sector is crowded out or forced to borrow at excessively high interest rates, investment enthusiasm will dampen. To mitigate this challenge, she advised securing low-interest foreign financing and ensuring those funds are managed efficiently.
“If foreign loans are not utilised appropriately, they will ultimately become a burden,” she warned.
