This year’s budget comes in different form and environment

The national budget for the 2025–26 fiscal year is set to be announced in a different form and under a different set of circumstances. This year’s budget stands out for two key reasons. First, for the first time in the country's history, the budget will be smaller than that of the previous year. Second, due to the absence of an active parliament, the budget will be announced by Finance Adviser Dr. Salehuddin Ahmed on June 2, reminiscent of the 2007–08 fiscal year when a similar situation occurred. The upcoming budget will place the highest priority on controlling inflation.

According to sources from the Ministry of Finance, the 2025–26 budget will be a contractionary one, amounting to Tk 7.90 trillion. In contrast, the original budget for the current fiscal year 2024–25 was Tk 7.97 trillion. This means the new budget will be Tk 70 billion smaller than the current one—an unprecedented move in Bangladesh's history.

Controlling inflation will be the top priority in the new budget, which is also expected to be equitable and welfare-oriented. Greater emphasis will be placed on sectors such as healthcare, education, information technology, and social safety nets. Special focus will be given to curbing inflation and creating employment opportunities. Additionally, rural infrastructure development will receive a boost. The coverage and allowances of the social safety net programs are also expected to be expanded.

The 2025–26 budget will target bringing inflation down to 6.5 percent, with a projected GDP growth rate of 5.5 percent. The budget deficit is expected to remain below 5 percent of GDP. The tax-free income threshold for individuals may be raised from Tk 350,000 to either Tk 375,000 or Tk 400,000. However, income tax, VAT, and duties may also be increased. The Annual Development Programme (ADP) allocation in the upcoming budget is likely to be around Tk 2.3 trillion, compared to the original allocation of Tk 2.65 trillion in the current year, which was later revised to Tk 2.16 trillion.

This year’s budget will not include any large-scale mega projects. The revenue target for the upcoming fiscal year is expected to be set at Tk 5.18 trillion. The National Board of Revenue (NBR) had originally set a revenue target of Tk 4.8 trillion for the current fiscal year, which was later revised down to Tk 4.635 trillion.

In a recent event, Finance Adviser Dr. Salehuddin Ahmed stated, “Controlling inflation will be the top priority in the upcoming budget. Other focuses will include increasing investment, conserving energy, and generating employment. The budget will also emphasize education, healthcare, skill development, and the information technology sector. Our goal is to ease people’s lives.”

On the matter of what the next budget should prioritize, eminent economist Dr. Mahbub Ullah said, “The upcoming budget should give the highest priority to education, healthcare, and social protection. At the same time, investment and job creation must be emphasized. The budget must contain effective measures to rein in inflation, which has been burdening ordinary citizens for a prolonged period. The budget must be one that offers relief to the general public.”

Since independence, Bangladesh has never experienced a budget that is smaller than that of the previous year. Typically, each year’s budget grows by 6 to 8 percent on average compared to the previous year. During the last 15 years under the Awami League government, annual budget increases ranged from Tk 500 billion to even Tk 1 trillion in some years. This is the first time an interim government is reducing the budget size for the 2025–26 fiscal year.

Finance ministry officials believe that if the budget deficit is kept under Tk 2.2 trillion in the upcoming fiscal year, the inflation target of 6.5 percent can be realistically achieved.

It is also reported that, in line with IMF conditions, the government may raise income tax, VAT, and import duties. While this may increase revenue, it is expected to significantly raise the cost of living, especially burdening the middle and lower-income groups. According to NBR sources, the upcoming budget will raise customs duties, VAT, and advance income tax (AIT) to meet revenue targets.

Moreover, the government plans to implement a uniform 15 percent VAT on all goods in the upcoming budget. Currently, VAT is applied inconsistently. By reducing exemptions and improving the tax system and administration, the NBR aims to raise an additional Tk 300 billion in revenue.

Bangladesh has one of the lowest tax-to-GDP ratios in the world—only 7.4 percent. The World Bank’s latest Bangladesh Development Update has warned that low revenue collection is limiting the government’s ability to invest in other sectors. The World Bank has recommended a range of institutional and policy reforms, including transparency in tax spending under a unified tariff policy, a uniform VAT rate, and reduction of tariff and non-tariff barriers. These are expected to be reflected in the upcoming budget.

Commenting on the upcoming 2025–26 budget, Dr. Fahmida Khatun, Executive Director of the Centre for Policy Dialogue (CPD), said, “This budget is being prepared under a special set of circumstances. We are already hearing that the new budget will be smaller than the current one. I think this is a positive step. There is no rule that says the budget has to be bigger every year just for the sake of it.”

It is worth noting that the original budget for the current 2024–25 fiscal year, amounting to Tk 7.97 trillion, was announced by then Finance Minister Abul Hassan Mahmood Ali under the Sheikh Hasina government. Later, an initiative was taken to revise the budget and limit it to around Tk 7.5 trillion. The 2023–24 fiscal year had a budget of Tk 7.61785 trillion, which was later revised down to Tk 7.14418 trillion.