Subsidy Burden Rises Amid Sluggish Revenue

The government’s plan to allocate Tk 125,741 crore in subsidies and incentives for FY2025–26 is straining fund mobilisation efforts amid ongoing macroeconomic challenges.

While this proposed allocation is 9% higher than the original FY2024–25 budget, it is about 11% lower than the revised figure of Tk 141,034 crore, which was inflated after the interim government cleared a backlog of payments across multiple sectors. The original FY25 allocation stood at Tk 115,000 crore.

In its medium-term macroeconomic policy statement (MPS) for FY26, the government acknowledged that limited revenue mobilisation is constraining the scope for further subsidy expansion. A large portion of the upcoming subsidy outlay will be directed toward the power, fertiliser, and food sectors.

Subsidy spending has surged in recent years due to expensive power generation, higher global fuel prices, inflation-driven food assistance for low-income groups, and the depreciation of the taka against the dollar.

To illustrate the growth: subsidies were only Tk 12,120 crore in FY2017–18, but rose sharply to Tk 31,000 crore by FY2021–22.