Bold Budget, Tough Arithmetic

When Finance Minister Amir Khosru Mahmud Chowdhury rose in parliament on Thursday, the symbolism required little explanation.

For the first time in nearly two decades, a BNP-led administration presented a national budget — and it arrived with a spending plan to match the moment.

At Tk 9.38 lakh crore ($75 billion), Bangladesh’s 55th national budget is the largest in the country’s history, 19 per cent higher than last year’s revised outlay.

It is also the first full-year fiscal blueprint of the Tarique Rahman administration, which secured a two-thirds majority in February.

Framed around the themes of “Economic Democratisation and Deregulation”, the budget seeks to stabilise an economy burdened by inflation, attract private investment, expand social protection and deliver on the promises of a party that spent nearly two decades in opposition.

Whether it can achieve those objectives is a more difficult question.

A Welfare Vision on a Fragile Foundation
The budget’s political priorities are clear. The government has proposed a Family Card programme for low-income households, a Farmers’ Card subsidy scheme, a digital E-Health Card targeting 2.5 million citizens, a Tk 2,000 crore SME fund and a Tk 500 crore Creative Economy initiative covering film, software, music and gaming.

The Annual Development Programme has been set at Tk 3 lakh crore, 50 per cent higher than the current fiscal year’s allocation, while education has been allocated Tk 1 lakh crore and health Tk 60,000 crore.

Public-sector pay rises are also set to take effect immediately at an additional cost of Tk 35,000 crore.
Chowdhury was explicit about the government’s objectives.

“Without building an inclusive and accountable economic system for all people, political reforms will not be durable,” he told parliament.
Economists broadly interpreted the budget in similar terms.

“A political government has presented this budget with its political priorities intact,” said Khondaker Golam Moazzem, Research Director at the Centre for Policy Dialogue (CPD). “Now, actually stabilising the economy and making this budget work is the real challenge.”

The Revenue Arithmetic
The principal vulnerability lies in the budget’s financing assumptions.

The government has set a revenue collection target of Tk 6.95 lakh crore, with the National Board of Revenue (NBR) expected to generate roughly 90 per cent of that amount.

Achieving the target would require the NBR to collect around Tk 2 lakh crore more than its likely outturn for the current fiscal year — an increase without historical precedent.

For comparison, during the first ten months of the current fiscal year, the NBR collected Tk 3.70 lakh crore against a revised target of Tk 5.03 lakh crore, leaving a shortfall of Tk 1.33 lakh crore despite the lower target.

The government’s strategy relies heavily on administrative reforms, including digitalising compliance systems, broadening the tax base and requiring Taxpayer Identification Number (TIN) certificates for opening bank accounts.

While these are widely regarded as sound structural reforms, administrative transformations rarely produce results within a single fiscal year.

In rural areas, where many account holders remain unfamiliar with TIN registration procedures, the requirement could generate administrative difficulties before yielding significant additional revenue.

The central contradiction is evident: the government is attempting to finance the largest budget in the country’s history while simultaneously reducing taxes in several sectors, including energy, pharmaceuticals, electronics and digital content creation.

Borrowing on a Large Scale
Should revenue collection fall short — as many independent analysts expect — the government may face difficult choices between curbing expenditure and increasing borrowing.

The projected budget deficit stands at Tk 2.43 lakh crore. The financing plan includes Tk 1.72 lakh crore in domestic borrowing and Tk 1.16 lakh crore from external loans and grants, including approximately $3 billion in direct budget support.

Bangladesh has not previously sought external budget support on this scale.
Domestic borrowing also carries risks.

If government borrowing absorbs a large share of available banking sector liquidity, credit available to the private sector could be constrained, potentially affecting investment and employment growth — both of which are essential for achieving the government’s GDP growth target of 6.5 per cent.

External financing presents its own uncertainties. International lenders are often cautious about extending large-scale budget support without policy conditions attached.

Financing on this scale could therefore be accompanied by reform requirements that may prove difficult to reconcile with some of the government’s welfare commitments.

Challenging Economic Conditions
The broader macroeconomic environment further complicates the outlook.
Economic growth has slowed for three consecutive years, falling below 4 per cent last year.

Inflation stood at 9.42 per cent in May and has remained above 9 per cent since 2023. Interest payments alone are projected to reach Tk 1.42 lakh crore this fiscal year.

“There is no alternative to increasing domestic resource mobilisation,” said Dr Mustafizur Rahman, Distinguished Fellow at CPD. “Otherwise, debt repayment pressure may intensify significantly in the years ahead.”

This is, unmistakably, a political budget, and the Finance Minister made little effort to present it otherwise. As a statement of intent from a party returning to power after 19 years, it is broadly coherent.

As an economic strategy, however, it rests on several demanding assumptions: that tax administration reforms can generate unprecedented revenue growth within a short period; that external financing will remain available on manageable terms; and that private-sector confidence will recover sufficiently to support the government’s growth ambitions.

If any of these assumptions prove misplaced, the record budget deficit could become less a driver of development than a source of additional macroeconomic pressure.

In public finance, ambition can set direction, but delivery ultimately determines success.