Subsidy growth falls behind needs
The government’s proposed allocation for subsidies, incentives and cash assistance in FY2026-27 is set to decline as a share of the economy despite growing concerns over rising import costs linked to ongoing tensions in the Middle East.
The conflict has contributed to higher global prices for fuel oil, liquefied natural gas (LNG) and fertilisers, increasing costs for electricity generation, industrial production and agricultural activities in Bangladesh. The situation has raised concerns about production expenses, food security and broader economic stability.
While government officials have acknowledged that additional support may be required to help industries and farmers manage higher costs, the proposed budget indicates a modest increase in overall subsidy spending rather than a significant expansion of support programmes.
According to Finance Division documents, subsidies, incentives and cash transfers will account for 1.71 per cent of GDP in FY2026-27, down from 1.86 per cent in the original FY2025-26 budget and 1.85 per cent in the revised allocation for the current fiscal year.
Finance Minister Amir Khasru Mahmud Chowdhury is scheduled to present the first budget of the new government in the 13th National Parliament on 11 June. The proposed budget totals Tk9.38 lakh crore, with a revenue target of Tk6.95 lakh crore, including Tk6.04 lakh crore from the National Board of Revenue (NBR). The remaining deficit is expected to be financed through domestic and external borrowing.
The government has proposed Tk117,125 crore for subsidies, incentives and cash assistance in FY2026-27, compared with Tk115,904 crore in the original budget for the current fiscal year. The revised allocation for FY2025-26 stands at Tk112,455 crore.
Although the proposed allocation is approximately Tk5,000 crore higher than the revised figure, much of the increase is not directed towards sectors facing the greatest pressure from rising import costs.
Subsidies for the power sector are proposed at Tk37,000 crore, unchanged from the original allocation for FY2025-26. The revised budget for the current year reduced power subsidies to Tk36,000 crore.
The government has also earmarked Tk6,500 crore for LNG imports and Tk27,000 crore for fertiliser imports. Of the fertiliser allocation, Tk17,000 crore will be provided through the agriculture sector, while the remainder will be financed under other subsidy programmes.
Despite continued increases in global fertiliser prices, agricultural subsidies are set to remain broadly unchanged from current levels.
Budget documents prepared by the Finance Division note that prolonged instability in the Middle East could increase expenditure requirements for electricity generation, LNG imports and agricultural support during the next fiscal year.
Meanwhile, food subsidies are projected to decline. The government has proposed allocating Tk9,600 crore for food support programmes in FY2026-27, compared with Tk10,214 crore in the revised budget for the current fiscal year.
Officials said support provided through Open Market Sales (OMS), the Trading Corporation of Bangladesh (TCB) and food-friendly programmes would gradually be scaled back as the government expands its family card programme for low-income households.
In contrast, the allocation for remittance incentives is set to increase. The government plans to raise spending on remittance support by Tk1,000 crore to Tk7,200 crore in FY2026-27 as part of efforts to encourage expatriate Bangladeshis to use formal banking channels and discourage informal money transfer systems.
The higher allocation reflects the growing importance of remittance inflows as a key source of foreign exchange earnings at a time when Bangladesh continues to face external economic challenges and pressure on its balance of payments.
