Business Report :
The non-development expenditure in the upcoming budget is expected to increase by more than 5 percent due to rising costs of debt servicing, food subsidies, and a special allocation for banking sector reforms, sources said.
According to the official sources, the upcoming budget is likely to be slightly smaller than the current fiscal year’s one.
A draft discussed at a recent fiscal coordination council meeting showed the next budget is projected to be Tk 7,90,000 crore-Tk 7,000 crore less than the current fiscal year’s budget.
This marks a departure from the previous governments’ practice of increasing the budget annually, as the interim administration has adopted a more conservative fiscal stance.
Non-development spending is expected to reach Tk 5,60,000 crore, reflecting a Tk 28,000 crore increase from the current year’s allocation.
Finance ministry officials have indicated that a portion of the increased expenditure will go toward recapitalizing state-owned banks facing capital shortages. Some selected private banks may also receive support under specific conditions.
Unlike in the past, the government plans to provide these funds as loans under IMF guidelines rather than direct capital injections. An IMF team is already providing technical assistance for this initiative.
In addition, the Asian Development Bank has signaled its approval of a $400-500 million loan package to support reforms in the banking sector.
Latest data from Bangladesh Bank shows a capital shortfall of Tk 65,267 crore among state-owned banks, with only Sonali Bank and Bangladesh Development Bank meeting the required levels.
Shariah-compliant banks are also under pressure, with a Tk 58,780 crore shortfall affecting eight out of ten Islamic banks-excluding Shahjalal Islami Bank and Exim Bank. A few conventional banks are similarly undercapitalized.
In response, the finance ministry and Bangladesh Bank have launched a rigorous reform package, including targeted capital support measures.
Officials emphasized that the government’s broader budget strategy is to curtail overall spending, refraining from increasing allocations for subsidies, public sector salaries, and allowances.
Nevertheless, certain areas will require unavoidable increases. With persistently high inflation, food subsidy allocations are set to rise by approximately Tk 2,500 crore, up from the current Tk 7,250 crore.
The total allocation for social safety net programs is also expected to grow by Tk 10,000 crore.
Taka devaluation is another major factor driving up costs, especially in interest and principal repayments on foreign loans.
For the current fiscal year, Tk 1,13,500 crore was earmarked for interest and debt servicing. The upcoming budget will likely require an additional Tk 20,000 crore for interest payments alone.
The taka’s depreciation-from Tk 110 to Tk 120 per US dollar since last June-has further increased the cost of foreign debt repayments.
According to the Economic Relations Division, foreign debt servicing rose 24 percent in dollar terms and 37 percent in taka terms during the first nine months of the fiscal year.
The government also intends to allocate Tk 800 crore under the Directorate of July Mass Uprising to support the families of those killed or injured in the 2024 unrest.
