CPD calls FY27 budget targets ambitious

The Centre for Policy Dialogue (CPD) has expressed concerns over the proposed national budget for FY2026-27, arguing that several of its key assumptions may be difficult to realise amid prevailing economic challenges.

Speaking at the think tank’s post-budget review on Friday, CPD Distinguished Fellow Mustafizur Rahman said the government’s projections for inflation, economic growth, investment and revenue mobilisation appear ambitious in light of current economic realities.

“The assumptions behind the budget are very ambitious. Given the present state of the economy, implementation will be a major challenge,” he said.

CPD Executive Director Fahmida Khatun also questioned the government’s target of reducing inflation to 7.5 per cent in the next fiscal year, saying the objective would be difficult to achieve without stronger supply-side management and a realistic monetary policy framework.

She noted that bringing inflation under control would require adequate supplies of food and energy, alongside the continuation of prudent monetary measures. She cautioned that higher public expenditure without corresponding gains in productivity, investment and employment could add to inflationary pressures.

“This is a large budget, and if the spending fails to generate jobs, investment and productivity, inflationary pressure may rise further,” Fahmida said.

The think tank observed that inflation in Bangladesh remains largely supply-driven, suggesting that monetary tightening alone would not be sufficient to curb price pressures. It emphasised the need to strengthen supply chains, ensure stable energy availability and improve food supplies to support inflation management.

According to CPD, average inflation stood at 8.6 per cent on a 12-month basis up to May, while point-to-point inflation reached 9.4 per cent, indicating that price pressures remain elevated.

Fahmida said the budget had been formulated at a time when the economy continues to face a range of challenges, including persistent inflation, weak private investment, slow employment generation, revenue shortfalls and vulnerabilities within the banking sector.

While acknowledging improvements in foreign exchange reserves driven by stronger remittance inflows, she said uncertainties surrounding energy supplies and global fuel prices remain significant risks to the economic outlook.

CPD also questioned the government’s GDP growth target of 6.5 per cent for FY2026-27, compared with a provisional estimate of 5 per cent for the current fiscal year.

The organisation noted that actual economic growth has recently remained slightly above 4 per cent, making the higher target difficult to attain without substantial improvements in investment and productivity.

The think tank further described projections for private investment and private-sector credit growth as optimistic, stressing that restoring business confidence would be essential to achieving stronger economic growth and lower inflation in the coming fiscal year.