CPD warns budget may be hard to achieve

The Centre for Policy Dialogue (CPD) has cautioned that the government’s ambitious budget for fiscal year 2026-27 may prove difficult to implement, citing persistent structural weaknesses, revenue constraints and concerns over institutional capacity.

Speaking at the “CPD Budget Dialogue 2026” in Dhaka on Sunday, the think tank said the budget reflects a greater emphasis on inclusiveness and human development, but warned that several of its key macroeconomic assumptions appear optimistic in light of recent economic performance.

Presenting the Independent Review of Bangladesh’s Development (IRBD), a team led by economists Dr Fahmida Khatun, Professor Mustafizur Rahman and Dr Khondaker Golam Moazzem questioned the feasibility of achieving the government’s projected GDP growth rate of 6.5 per cent.

According to CPD, the target appears ambitious given that provisional estimates indicate economic growth slowed to around 4.14 per cent in the previous fiscal year.

The organisation also highlighted inflation as a continuing challenge. While the budget aims to reduce inflation to 7.5 per cent, recent moving averages have remained closer to 8.63 per cent, raising concerns about the pace of disinflation.

CPD further questioned the government’s revenue projections, warning that the fiscal framework could face pressure if collection targets are not achieved.

The budget envisages an 18.2 per cent increase in revenue mobilisation, despite the National Board of Revenue (NBR) continuing to face significant collection shortfalls.

To finance the budget deficit, the government plans to rely more heavily on external borrowing.

According to CPD, the share of foreign loans in deficit financing is expected to increase from 29 per cent to more than 45 per cent.

Analysts also expressed concern over the size of the Annual Development Programme (ADP).

Although the increased allocation reflects a commitment to infrastructure development and social investment, CPD noted that development spending has historically suffered from underutilisation, suggesting a gap between planning and implementation.

The think tank observed that health and education have received substantial budget increases. However, it warned that limited institutional capacity in these sectors could affect the efficient use of additional resources.

Employment generation was identified as another area of concern. CPD noted that the government’s pledge to create 10 million jobs within 18 months is not supported by a clearly defined national employment programme and appears to depend largely on indirect private-sector growth.

It also pointed out that several ministries linked to employment generation did not receive significant increases in funding.

On social protection, CPD welcomed initiatives such as the Family Card and Farmer Card programmes as steps towards more targeted welfare support.

However, it cautioned that implementation challenges and potential leakages could undermine their effectiveness.

Concluding its assessment, the organisation urged the government to place greater emphasis on implementation, institutional strengthening and policy execution rather than relying on ambitious headline targets.

It also called for a clearer roadmap for Bangladesh’s graduation from least developed country (LDC) status and reforms to make the tax system more equitable.

Addressing the event, Finance Minister Amir Khosru Mahmud Chowdhury said the government plans to restructure public financing mechanisms to support the budget while limiting the economy’s debt burden.

“We cannot keep looking towards the World Bank, International Monetary Fund (IMF) and Asian Development Bank (ADB). We need to restructure our own public financing,” he said.

The minister noted that the gap between concessional multilateral financing and market borrowing costs has narrowed significantly, increasing the cost of public borrowing.

He announced a gradual reduction in government borrowing from domestic banks, arguing that prevailing interest rates of 12 to 14 per cent are too high for both the public and private sectors.

“It is simply not feasible for the government to continue borrowing at such costs,” he said.

Khosru also pointed to external challenges, including uncertainty in Middle Eastern labour markets, and said the government had inherited substantial financial liabilities across several sectors.

He noted that the administration had only around six weeks to prepare the budget, compared with the usual six-month preparation period.

The finance minister further indicated that Bangladesh’s trade system would gradually move away from reliance on letters of credit (LCs) towards direct payment mechanisms, in line with international practice.

Dr Fahmida Khatun described the budget as the new government’s first major opportunity to demonstrate its capacity to revive the economy through sustained structural reforms.

“The success of the budget will ultimately depend on the quality of execution and the strength of institutional capacity to deliver,” she said.