Published: 12:10 AM, 15 June 2026
A Big Budget in A Small Fiscal Room
Dr. Mohammed A Rab
A Budget at the Inflection Point
The national budget for fiscal year 2026-27, presented to the 13th Jatiya Sangsad on 11 June 2026, is the first full budget of the Bangladesh Nationalist Party government formed after the February 2026 election. Finance Minister Amir Khosru Mahmud Chowdhury presented it to the Parliament in less than four months into Prime Minister Tarique Rahman's administration, marking the BNP's first budget in twenty years.
The total outlay is Tk 9,38,000 crore, the largest budget in Bangladesh's history, equal to 13.7 percent of projected GDP. The revenue target is Tk 6,95,000 crore, of which the National Board of Revenue must collect Tk 6,04,000 crore. The remainder comes from non-NBR taxes of Tk 25,000 crore and non-tax revenue of Tk 66,000 crore. The deficit is Tk 2,43,000 crore, or 3.6 percent of GDP, larger than this year's in taka terms but at a similar ratio. The Annual Development Programme rises to Tk 3,00,000 crore. Growth is targeted at 6.5 percent, and inflation at 7.5 percent. The official theme is "Economic Democratization and Deregulation: Bangladesh's Journey Towards a Trillion Dollar Economy."
The budget arrives at a difficult moment. Inflation reached 9.04 percent in April 2026, driven mainly by nonfood prices linked to the Middle East conflict and elevated energy costs. The closure of the Strait of Hormuz alone has added an estimated three billion US dollars to the energy import bill over four months, a shock that earlier planning failed to anticipate. Private-sector credit grew by only 4.7 percent between March 2025 and March 2026, signaling weak investment. Reserves recovered to over USD 30 billion by May 2026, up from a 2023 low of USD 20 billion, but remain vulnerable to energy shocks. The Reciprocal Trade Agreement with the United States, signed in February 2026, cut export tariffs to 19 percent but added binding obligations on trade alignment, export controls, and digital trade. The budget is thus shaped as much by what is unavailable as by what is possible.
What the Government Is Trying to Do
The budget attempts five things at once: honour a heavy election manifesto, absorb global price shocks through expanded subsidies, service a rising debt interest burden, finance a partial pay rise through a new pay commission, and signal fiscal credibility to the IMF and investors. The Tk 1,48,000 crore expansion over this year's original budget reflects these pressures, as does the Tk 60,000 crore Bangladesh Bank stimulus announced earlier in 2026 for small businesses, closed factories, agriculture, and export diversification. The government has also spent around Tk 40,000 crore this year recapitalizing weak banks. The stance is expansionary, though largely involuntary.
Read in isolation, the targets are coherent: 6.5 percent growth, roughly a 23 percent rise in revenue, and an ADP about thirty percent larger than this year's original figure. Read against performance, they look ambitious. The NBR fell more than Tk 1 lakh crore short of its target by April 2026 and is now being asked to increase collections by 17 percent over this year's target, despite revenue falling short year after year. The tax-to-GDP ratio is around 7.3 percent, the lowest in South Asia and, as the Centre for Policy Dialogue notes, the lowest in Asia. The BNP's pledge is to lift this to 10 percent in the medium term and 15 percent by 2035, credible only with structural revenue measures.
A Critical Assessment
Strengths
The budget has defensible features. It does not understate the deficit: a 3.6 percent of GDP projection is honest and comfortably below the internationally accepted 5 percent ceiling, a point worth acknowledging plainly. It signals an intent to expand social protection and subsidies amid 9 percent inflation, a politically sensitive but economically defensible move given the vulnerability of low-income households. It carries a credible reserve buffer above USD 30 billion and retains the Bangladesh Bank stimulus for productive sectors. By significantly raising the ADP, it acknowledges the longstanding under-execution of capital spending that has held back infrastructure and human development.
Weaknesses and Risks
The weaknesses are equally clear. Asking the NBR to grow collections by 17 percent, when it is already more than Tk 1 lakh crore behind for the current year and has missed every recent target, risks turning the figure into fiction within months, forcing the kind of mid-year revisions that have defined recent budgets. The CPD has warned repeatedly that tax administration must be modernised, evasion curbed, and the direct tax base widened without overburdening ordinary citizens, advice given to every government since 2009 and acted upon by none.
Deficit financing is also a concern, even if the headline ratio is manageable. Of the Tk 2,43,000 crore gap, about Tk 1,10,000 crore comes from foreign borrowing and Tk 1,27,000 crore from domestic sources (Tk 1,12,000 crore from banks, Tk 15,000 crore through savings instruments). Domestic bank borrowing at this scale crowds out private credit, already growing below 5 percent, and adds to an interest bill of Tk 1,27,500 crore, of which Tk 1,05,000 crore is for domestic debt alone. Interest payments are the silent thief of fiscal space: every taka spent servicing debt is a taka not spent on schools, health centres, or rural infrastructure, and this bill now exceeds the combined education budget. The pay commission, while politically necessary, will lock in higher recurrent spending for years, narrowing room for development.
External risks are not adequately hedged. The Middle East conflict is pushing energy prices higher, and Bangladesh imports most of its fuel. The US Reciprocal Trade Agreement, while welcome for tariff reductions, imposes obligations that may constrain other trade deals and require costly regulatory upgrades. The IMF program remains a key anchor of credibility, but its conditions sit awkwardly with the BNP's promises on subsidies and pay, a tension the budget leaves unaddressed.
Sectoral and Equity Questions
The ADP expansion is welcome, but the question is what the additional Tk 70,000 crore over this year's original ADP will actually buy. Economists, including Mustafizur Rahman and Selim Raihan, have urged scrapping long-stalled zombie projects, reprioritizing spending toward health, education, and skills, and resisting new mega-projects, which absorbed the lion's share of the development budget over the previous decade while social sector allocations stagnated. Health allocations have been proposed to nearly double, and education has received a significant increase, but ADP spending through April 2026 stood at only around 60 percent of the revised allocation, raising doubts about deploying a much larger program.
On equity, the budget will be judged less by the headline number than by who pays and who benefits. The system relies heavily on indirect taxes, particularly VAT, which falls disproportionately on lower-income households, and inflation above 9 percent is itself a regressive tax. Unless the budget shifts the burden toward direct taxes on income, wealth, and property and indexes social transfers to food and energy prices, it will struggle to meet its own equity tests. Targeted relief, including a family card program and cash transfers, needs to be scaled up and made structural rather than compensatory.
Institutional and Governance Dimensions
Finally, there is a governance dimension no budget can resolve on its own. Non-performing loans in the banking sector stood at 30.60 percent of total loans as of December 2025, an extraordinarily high figure reflecting years of weak governance and political interference. Procurement and project implementation remain plagued by delays, cost overruns, and integrity gaps. Credibility will depend on whether the institutions that execute the budget, including the NBR, line ministries, the banking regulator, and the Implementation Monitoring and Evaluation Division, are reformed in parallel. The first budget of a new government is the right place to make those commitments visible, but the framing so far has been heavier on numbers than reform.
Conclusion: Big in Numbers, Tight in Choices
The FY 2026-27 proposal is a large budget for small fiscal space. It seeks to honor an ambitious manifesto, cushion citizens against 9 percent inflation, finance a larger development program, and reassure international lenders, all at once, with revenue capacity the lowest in Asia and an interest bill exceeding the education budget. The deficit ratio of 3.6 percent is more measured than pre-budget commentary suggested, and credit should be given where due. But this manageable ratio tells only part of the story. Revenue targets that require an NBR already a lakh crore behind to grow collections by 17 percent, an ADP with a history of under-execution, and non-performing loans at 30.60 percent all point to structural fragility no single budget can resolve.
The real test will not be the speech on June 11 but the twelve months that follow: whether NBR modernization accelerates, whether zombie projects are scrapped, whether social protection is expanded and indexed, and whether the institutional weaknesses behind repeated midyear revisions are finally addressed.
For a government returning to power after twenty years, the first budget is also a political signal about whether the regime change brings shifts in fiscal discipline, spending priorities, and the social contract those choices encode. The official theme, economic democratization and deregulation, sets a high bar. On balance, the FY 2026-27 budget is a competent stabilization effort under heavy constraints rather than a transformational one, perhaps the most that can be expected now. It is not yet enough.
Dr. Mohammed A Rab writes
on politics and economic
phenomena. He is based in
the United States of America.
