The upcoming fiscal year of 2026-27 is projected to witness a budget surpassing Tk 9,00,000 crore as the government aims to fulfill its electoral promises, partially implement salary hikes for its employees, and safeguard the economy amidst the ongoing Middle East conflict. The preliminary budget framework is set to be finalized today at a high-level meeting led by Finance Minister Amir Khosru Mahmud Chowdhury.
The original budget for the current fiscal year 2025-26 stood at Tk 790,000 crore, later revised to Tk 788,000 crore with reduced development spending but increased allocations for subsidies and non-development expenses. The new administration is gearing up for a substantial expansion with initial proposals reaching Tk 920,000 crore, marking one of the most significant budget increments in recent history.
A senior official from the finance ministry, speaking on condition of anonymity, emphasized the significance of this budget as it sets the tone for the government’s priorities and financial groundwork to fulfill its commitments over the next five years. The budget expansion is primarily driven by heightened expenditure commitments, particularly in public sector salaries, subsidies, and social protection, alongside the necessity to mitigate external shocks stemming from the US-Israel conflict with Iran.
Despite the ambitious budget expansion, revenue collection is anticipated to fall short of its target. The revenue target for the next fiscal year may be raised to Tk 650,000 crore, considering the current collection projections are likely to be below par. The deficit for the upcoming fiscal year is expected to hover around 5 percent of GDP, surpassing the initial target of 3.3 percent due to weak revenue performance and escalating expenditures.
The government is contemplating setting a higher GDP growth target of 6.5 percent for the next fiscal year, coupled with reducing inflation to 7 percent, contingent on the resolution of the US-Israel conflict. The implementation of various electoral commitments, including the flagship Family Card program costing Tk 13,000 crore in its inaugural year, is on the agenda for the next fiscal year.
To manage the increasing demands, the finance ministry plans to consolidate existing social safety net schemes. The government is also strategizing a phased rollout of the Pay Commission’s recommendations, with a committee led by the cabinet secretary tasked with drafting implementation proposals. Additionally, a committee has been formed to review the Annual Development Programme with expectations of setting it at approximately Tk 300,000 crore.
In light of rising fuel prices and electoral commitments, the government faces constraints in reducing revenue expenditure, necessitating revenue-boosting initiatives. Mustafizur Rahman, a distinguished fellow at the Centre for Policy Dialogue, underscored the urgency for reforms, emphasizing modernizing the tax system, enhancing digitalization, combating tax evasion, and broadening direct taxes while ensuring minimal burden on citizens.
Mustafizur cautioned against exceeding a budget deficit of 4 to 5 percent to avoid unsustainable debt pressure, highlighting the need to reduce borrowing dependence, enhance foreign aid utilization, and ensure realistic budgeting. Failure to bolster revenue streams risks spiraling the budget deficit out of control, posing a significant challenge for the government.