Fiscal framework under strain: Debapriya

Economist Debapriya Bhattacharya has questioned the government’s macroeconomic assumptions underlying the proposed FY2026–27 budget, arguing that several projections appear detached from current economic realities.

Speaking at a media briefing titled “National Budget 2026–27: What Is There for Disadvantaged Citizens?” organised by the Citizens’ Platform for SDGs, Bangladesh on Sunday (15 June), Debapriya said lower- and middle-income households are currently facing a “triple pressure” of high inflation, stagnant real wages and declining savings.

He expressed particular concern over the government’s continued reliance on indirect taxation.

According to him, nearly 60 per cent of additional revenue mobilisation is expected to come from VAT and other indirect taxes, which affect consumers irrespective of income level.

Debapriya warned that Bangladesh’s middle class is unlikely to see significant relief in the coming fiscal year, despite some tax concessions proposed in the FY2026–27 budget, as inflation, weak wage growth and falling household savings continue to erode purchasing power.

“Even if people are working, they are not necessarily moving forward economically,” he said. “Inflation remains higher than wage growth, while household savings are declining.”

According to the Citizens’ Platform analysis, inflation stood at 9.42 per cent in May 2026, while wage growth was 8.13 per cent, indicating a continued decline in real incomes.

At the same time, domestic savings have fallen sharply from 25.76 per cent of GDP in FY23 to 21.38 per cent in FY26.

He further remarked that “the policy framework may be thoughtful, but it is standing on a weak and to some extent dysfunctional fiscal framework. The medium-term macroeconomic frameworkis even weaker. In fact, we believe it is not merely weak, but unprofessional.”

The Citizens’ Platform also cautioned that the government’s recovery strategy may be difficult to achieve within the proposed one-year timeframe, particularly as key employment-generating sectors continue to face challenges.
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However, it criticised the increase in advance income tax on savings certificates from 5 per cent to 10 per cent, arguing that it would discourage small savers.

Highlighting regional disparities, Debapriya stressed the need for targeted interventions in northern Bangladesh, the Chittagong Hill Tracts and coastal areas.

While acknowledging the rise in social protection spending as a positive step, he said a significant portion is allocated to pensions for government employees, limiting the overall coverage of social protection programmes.

Outlining four recommendations for budget implementation, he called for the publication of updated economic data, quarterly reports on budget execution to Parliament, the formation of a parliamentary caucus for disadvantaged groups, and the introduction of a “reform tracker” to monitor implementation progress.

“The biggest challenge is implementation,” he said, adding: “Without realistic data and accountability, the intended benefits of the budget may not reach those who need them most.”