A budget of Tk9.38 trillion

To overcome a distressed economic situation, cope with global pressures, tackle persistently high inflation, address the energy crisis, revive stagnant investment, restore balance to foreign exchange reserves, continue reform programmes, and confront challenges in the weak financial sector, the government has prepared an ambitious budget of Tk9.38 trillion for the 2026–27 fiscal year.

The budget not only envisages high expenditure but also projects a substantial revenue income of Tk6.95 trillion. Even so, it leaves a record budget deficit of Tk2.43 trillion, which will have to be financed, as in previous years, through foreign borrowing and domestic sources.

Compared with the Tk7.90 trillion budget for the current 2025–26 fiscal year, the proposed budget represents an increase of Tk1.48 trillion, or 18.73 percent, marking the largest increase in the country’s history. However, in response to prevailing economic challenges and ahead of the 13th parliamentary election, the interim government had announced a budget for 2025–26 that was Tk100 billion lower than the previous year’s budget, and its implementation remains slow. These findings emerged from an analysis of the summary prepared for the upcoming budget. Finance Minister Amir Khasru Mahmud Chowdhury has already held a series of meetings with Prime Minister Tarique Rahman regarding the budget. The Finance Division finalised the budget summary based on the Prime Minister’s guidance.

According to the latest budget draft, the government has identified 13 priority areas, including controlling inflation, ensuring food security, economic recovery, achieving higher growth, implementing election manifesto commitments, expanding social safety nets, introducing Family Card and Farmer Card programmes to establish a welfare-oriented economy, and generating broad-based employment. The government has already begun implementing the Family Card and Farmer Card initiatives, which form part of the BNP’s election pledges. The Finance Minister is expected to propose an allocation of Tk1.38339 trillion for this sector, at least Tk120 billion more than the previous year. The number of beneficiaries will also be increased. Reform programmes, in line with election commitments, will continue throughout the year.

Officials from the Finance Division and the National Board of Revenue (NBR) said that Prime Minister Tarique Rahman, who assumed office after two decades, wants his first budget to serve as a new milestone for the country’s economy. He has reportedly continued working on it even during the Eid holidays. This will also be the first budget of Finance Minister Amir Khasru Mahmud Chowdhury and is scheduled to be presented in Parliament on 11 June. The details of the budget speech are currently being refined.

Despite the numerous challenges, the government intends to provide some relief to ordinary citizens. Special measures will be adopted to keep essential commodity prices under control. Social protection coverage will be expanded, and the tax-free income threshold will be increased. Deregulation will be introduced across various government departments to facilitate business. Corporate tax rates will be reduced while the tax net will be widened. One-off financial assistance will be provided to encourage new entrepreneurs. To stimulate investment, the government plans to reintroduce an opportunity to legalise undisclosed wealth, believing this could be particularly effective in repatriating funds transferred abroad.

Growth Target of 6.5%, Inflation at 7.5%

According to the budget draft, the government has set a GDP growth target of 6.5 percent for 2026–27. The interim government had set a target of 5.5 percent for the current fiscal year. The World Bank, however, estimates Bangladesh’s growth this year could remain below 5 percent. Moreover, global economic activity is expected to remain sluggish due to international uncertainty and the ongoing Iran-Israel-US tensions. Despite this, the newly elected government has adopted an ambitious growth target.

The government has also set an inflation target of 7.5 percent. Economists argue that achieving this target will be difficult given current market conditions and global uncertainty. Inflation has remained close to double digits for several years, while fuel prices have risen sharply due to the Iran-Israel conflict. Electricity tariff increases are also under consideration.

Gradual Increase in Fuel and Power Prices

The budget draft states that prices of oil, gas and electricity will be adjusted gradually during the coming year. This is widely viewed as reflecting conditions imposed by the International Monetary Fund (IMF). The government has begun discussions for an additional $3 billion loan programme on top of the existing $4.7 billion arrangement.

Although there has been pressure to phase out subsidies in the energy sector, the budget proposes Tk117.125 billion in subsidies, incentives and cash support, including Tk370 billion for the power sector alone.

Budget Revenue and Expenditure

The total budget size for 2026–27 is projected at Tk9.38 trillion. Operating and other expenditures are estimated at Tk6.38 trillion, while development expenditure stands at Tk3 trillion, already approved under the Annual Development Programme (ADP).

The NBR will remain the government’s principal source of revenue. Total revenue collection is targeted at Tk6.95 trillion, comprising:

• Tk6.04 trillion from NBR taxes;

• Tk250 billion from non-NBR sources; and

• Tk660 billion from non-tax revenue.

The remaining Tk2.43 trillion will constitute the budget deficit.

ADP of Tk3 Trillion

The government has approved an Annual Development Programme worth Tk3 trillion for 2026–27. Of this, Tk1.9 trillion will come from domestic resources, while Tk1.1 trillion will be financed through foreign aid and loans.

The ADP includes more than 1,400 projects, of which 1,277 are new projects. Priority sectors include transport and communications, education, health, power and energy, housing and community facilities, agriculture and rural development, social protection, and climate resilience.

Financing the Budget Deficit

Due to the difficult economic situation and global challenges, the revenue shortfall during the first ten months of the current fiscal year exceeded Tk1 trillion. Nevertheless, the government has set an ambitious revenue target.

To finance the Tk2.43 trillion deficit, the government plans to borrow:

• Tk1.12 trillion from banks;

• Tk150 billion from non-bank sources; and

• Tk1.16 trillion from foreign sources.

At the same time, foreign debt repayments amounting to Tk460 billion are planned for the next fiscal year.

Eight Key Challenges

The government has identified eight major challenges for 2026–27:

1. Controlling inflation;

2. Achieving revenue collection targets;

3. Gradually moving away from austerity measures;

4. Balancing subsidies for gas, electricity and fertiliser while financing development projects;

5. Accelerating project implementation;

6. Addressing slow implementation in education and health projects, particularly those dependent on foreign financing;

7. Continuing structural reforms to attract domestic and foreign investment and improve the business environment; and

8. Increasing revenue collection to strengthen debt sustainability.

Key Policy Responses

Proposed responses include:

• Improving tax administration and automation;

• Expanding the income tax and VAT base;

• Reducing reliance on tax exemptions;

• Strengthening monitoring to ensure full ADP implementation;

• Increasing capacity to utilise foreign financing in education and health sectors;

• Continuing limited austerity measures;

• Gradually adjusting fuel and electricity prices;

• Expanding Family Card, Farmer Card and other social safety programmes; and

• Implementing development programmes to address climate change impacts.

Budget Priorities

The budget prioritises:

• Achieving growth to transform Bangladesh into a $1 trillion economy by 2034;

• Controlling inflation and maintaining macroeconomic stability;

• Expanding social protection through Family Card and Farmer Card schemes;

• Creating entrepreneurs and employment opportunities at home and abroad;

• Developing physical and social infrastructure;

• Promoting research, innovation and internationally competitive education;

• Expanding access to quality healthcare;

• Restoring discipline in the financial sector;

• Supporting agriculture to ensure food security;

• Addressing climate change; and

• Improving the investment climate through deregulation.

New Initiatives

The government is considering introducing a new concept known as the “creative economy” to generate employment for young people. This would include incentives and dedicated funds for information technology, freelancing, cultural industries, innovation-driven businesses and start-ups.

Social Protection and Welfare Programmes

To bring more people under social protection, the government plans to expand coverage significantly. A total allocation of Tk1.38339 trillion has been proposed for social protection programmes, including Family Card and Farmer Card initiatives, representing an increase of at least Tk120 billion over the previous year.

Expert Opinions

Dr Rashed Al Mahmud Titumir, Economic and Planning Adviser to the Prime Minister, said the government would introduce a range of measures to provide relief to all sections of society and keep essential commodity prices within people’s purchasing power.

Former World Bank Chief Economist Dr Zahid Hussain described the budget as particularly challenging for the BNP government. He said restoring confidence in the troubled financial sector, reviving investment and increasing employment should be key priorities. He also stressed the need to overhaul social protection programmes, although he believes the government will place greater emphasis on fulfilling its election pledges.