National budget to shrink in size for the first time

The interim government is set to present the country's 54th national budget on June 2. For the 2025–26 fiscal year, the proposed budget size is expected to be Tk 7.90 trillion (Tk 7,90,000 crore), which is Tk 70 billion (Tk 7,000 crore) less than the budget of the current 2024–25 fiscal year.

This is the first time in Bangladesh’s history that the size of the national budget is decreasing. In the past, all 53 budgets presented have shown an increase in allocation. Also, while budgets in Bangladesh are traditionally presented on Thursdays, this year the proposed date falls on a Monday.

According to sources from the Finance Ministry, the size of the current 2024–25 fiscal year's budget is Tk 7.97 trillion (Tk 7,97,000 crore). Compared to that, the upcoming budget will reduce by Tk 70 billion (Tk 7,000 crore).

Regarding the reduction in the budget size, a source from the Finance Ministry stated that government revenue is low in the current fiscal year, and tax and duty collection has not increased significantly. At the same time, a large amount of money is being spent on repaying foreign aid loans. Due to these reasons, the size of the upcoming budget is being reduced.

However, despite the reduced size, economists have expressed concerns about the implementation of the budget. Dr Zahid Hussain, former Lead Economist of the World Bank's Bangladesh office, said, “It is going to be a comparison between one imaginary number and another. None of the budgets announced in the country so far have been fully implemented— they’ve all remained in the realm of imagination. This time, yet another imaginary budget is being prepared based on that same imaginary world.”

According to sources from a meeting of the Technical Committee of the Finance Division under the Finance Ministry, the government may set the inflation target at 6.5 percent for the upcoming fiscal year, similar to the current fiscal year.

The GDP growth target for the upcoming fiscal year is expected to be 5.5 percent, down from the current fiscal year’s target of 6.5 percent. The total Gross Domestic Product (GDP) is likely to be estimated at Tk 63.15 trillion (Tk 63,15,000 crore) in the next budget. The budget deficit is expected to be set at 3.62 percent of GDP.

Based on this estimation, the government's revenue target through the National Board of Revenue (NBR) could be around Tk 5.18 trillion (Tk 5,18,000 crore). The remaining funds will need to be sourced from the banking system, savings instruments, foreign sources, and other means. In the current 2024–25 fiscal year, the NBR’s revenue collection target is Tk 4.80 trillion (Tk 4,80,000 crore).

It has been reported that the NBR wants to set a revenue target of Tk 5 trillion (Tk 5,00,000 crore). On the other hand, the International Monetary Fund (IMF) is continuing to pressure the government to set a higher target of Tk 5.80 trillion (Tk 5,80,000 crore) as part of its ongoing reform programme.

Economist Zahid Hussain said, "No previous government has been able to achieve its budget implementation targets. By the end of the current fiscal year, GDP growth will not exceed 4.5 percent."

Furthermore, if the GDP growth target is set at 5.5 percent for the upcoming fiscal year, it would require a 100 basis point increase from the current year’s projected growth. On the other hand, if inflation is targeted at 6.5 percent, it would mean reducing it by 200 basis points. According to experts, achieving both targets at the same time is not realistic or feasible.

"Although the budget deficit as a percentage of GDP may be lower compared to last year, the actual amount in monetary terms will tell a different story. As a result, the funds expected from foreign sources may not be very promising either," Hossain said.

“As a result, the government will have to rely heavily on the banking sector to cover the budget deficit. This, like in previous budgets, will negatively impact the flow of credit to the private sector. As a result, there will be limited opportunities for new investments,” he added.

According to the economist’s analysis, if the flow of money to the private sector remains low, it will create additional pressure on the dollar. As a result, inflation will rise instead of falling. He emphasized the need to move away from an imaginary approach and instead propose a realistic and implementable budget—one that ensures a healthy flow of funds to the private sector to encourage new investments, keeps inflation under control, and ultimately provides relief to the people.

Meanwhile, for the Annual Development Programme (ADP), the government may allocate Tk 2.30 trillion (Tk 2,30,000 crore) for the upcoming fiscal year. This is a decrease from the current fiscal year's allocation of Tk 2.65 trillion (Tk 2,65,000 crore).

According to sources from the Finance Ministry, the upcoming budget will focus on improving neglected rural infrastructure with an emphasis on employment generation. Additionally, there will be an attempt to increase allowances for beneficiaries under the social security sector, as well as address the demands of teachers in the next budget.

There are indications that the spirit of the July movement and the recommendations from the White Paper Committee and Task Force reports will be reflected in the upcoming budget.

According to sources from the Finance Ministry, although the size of the budget will not increase, the government's expenditure on salaries, allowances, and domestic and foreign debt repayments will rise slightly. On the other hand, spending on development activities will be reduced. Additionally, cutting subsidies in various sectors will present a major challenge for the government.