Larger budget on the table
The BNP-led government is preparing to expand public spending significantly in the upcoming national budget, citing growing economic pressures and policy commitments, according to senior officials who attended a high-level meeting on Friday.
The proposed budget for the 2026–27 fiscal year is expected to reach around Tk9.1 lakh crore, marking a notable increase from the current fiscal framework.
Officials said the expansion is being driven by global economic uncertainties, rising subsidy requirements, increasing interest payment obligations and plans for a partial salary adjustment for government employees, alongside a stronger focus
on social safety net programmes.
The decisions were discussed at the second meeting of the government’s Financial, Monetary and Exchange Rate Coordination Council for FY2025–26.
The virtual session was chaired by Finance Minister Amir Khasru Mahmud Chowdhury and attended by the Bangladesh Bank governor, senior finance ministry officials and representatives from key economic and revenue institutions.
The meeting was relatively brief, as several senior officials, including the finance minister, departed for Washington to hold discussions with the International Monetary Fund (IMF). Budget deliberations are expected to resume after their return.
Officials indicated that the final size of the budget could still change depending on global developments, particularly geopolitical tensions such as the ongoing US–Israel–Iran conflict.
The government is aiming to achieve a GDP growth rate of 6.5 per cent while reducing inflation to 8 per cent in the next fiscal year.
Addressing Parliament, the finance minister acknowledged the challenge of balancing public expectations with inherited economic constraints.
He stressed that the government’s priority is not only economic growth but also sustainability, transparency and inclusive management of public finances.
In the current fiscal year, the original budget of Tk7.9 lakh crore was slightly reduced in the revised version, mainly through cuts in development spending while allocations for subsidies and operational costs were increased.
For the upcoming fiscal year, around Tk6.4 lakh crore is expected to be mobilised through revenue collection, leaving a projected deficit of Tk2.7 lakh crore, which is expected to remain within 5 per cent of GDP.
To finance the deficit, the government plans to rely on both domestic and foreign sources, with Tk1.5 lakh crore expected from internal borrowing and Tk1.2 lakh crore from external loans, including budget support from development partners.
Efforts are also underway to strengthen revenue mobilisation by reducing VAT exemptions and accelerating the digitisation of tax collection systems.
The government has set a medium-term target of raising the tax-to-GDP ratio to 10 per cent by FY2027–28.
Expenditure priorities show that nearly two-thirds of the budget will go towards operational expenses, leaving about one-third for development activities.
While new projects may be approved, major spending on them is likely to remain limited in the short term.
Rising global energy prices, particularly linked to the Iran crisis, are expected to push subsidy spending higher, especially in electricity, fuel, agriculture and fertiliser.
The government has already allocated an additional Tk36,000 crore between March and June of the current fiscal year to manage energy-related costs.
At the same time, several social and economic initiatives are being planned.
These include expanding the Family Card programme to cover five million households, distributing Farmer Cards to support agricultural stakeholders and providing scholarships for young athletes under the Notun Kuri programme.
Together with plans to increase public sector salaries and generate employment, these initiatives are expected to cost around Tk1 lakh crore.
Officials said that although the growing budget presents fiscal challenges, the expansion has become necessary to address current economic realities and fulfil key policy commitments.
