The annual budget will remain unchanged in FY26 due to the financial crisis

Government to Downsize Budget for FY 2025-26 Amid Financial Constraints

The government has decided to scale down the annual budget for the 2025-26 fiscal year due to low revenue collection, sluggish tax and duty growth, and rising foreign loan repayments. As a result, the upcoming budget is expected to be either similar to or smaller than the current one, according to finance ministry sources.

For the 2024-25 fiscal year, the original budget was set at Tk 7.97 trillion. However, the interim government has initiated a revision to lower it to Tk 7.5 trillion. In the previous fiscal year (2023-24), the budget was initially Tk 7.61 trillion but was later reduced to Tk 7.14 trillion.

Finance Adviser Salehuddin Ahmed stated that the government has no choice but to downsize the next budget. The Annual Development Programme (ADP) will also face cuts, with no new major projects planned, though funding for ongoing large-scale projects will continue.

Prioritizing Rural Infrastructure and Social Safety

The upcoming budget will emphasize rural infrastructure development to boost employment opportunities. Salehuddin Ahmed noted that this sector has long been overlooked. Additionally, efforts will be made to increase allowances for social safety beneficiaries and address teachers’ demands. He also hinted that the budget would reflect the spirit of the July movement and incorporate recommendations from the white paper formulation committee and task force.

Despite fiscal constraints, spending on salaries, allowances, and domestic and foreign debt repayments will see a slight increase. However, development expenditures will remain limited.

Budget Presentation Without Parliament

Since there is no functioning national parliament, Finance Adviser Salehuddin Ahmed will present the budget on television in early June. The budget will then be endorsed by the president through an ordinance, similar to previous caretaker governments. Traditionally, the finance minister presents the budget before parliament, but given the absence of a political government, a televised presentation will serve as the alternative.

Revenue Challenges and Inflation Target

The National Board of Revenue (NBR), responsible for a significant portion of the budget, initially set a revenue collection target of Tk 4.8 trillion for the current fiscal year. However, this target was later revised to Tk 4.63 trillion. In the first seven months (July-January), the NBR collected only Tk 1.96 trillion, falling short by Tk 510 billion.

Meanwhile, the government aims to reduce inflation to 7% in the next fiscal year, down from the persistent double-digit rates seen over the past year. Inflation finally dropped below 10% last month after ten consecutive months of exceeding that threshold.

The budget deficit for the current fiscal year was estimated at Tk 2.56 trillion, or 4.6% of GDP. For the 2025-26 fiscal year, the government plans to keep the deficit below 5% of GDP, with a GDP growth target set at 5.5%.

Expert Insights

Selim Raihan, Executive Director of the South Asian Network on Economic Modeling (SANEM), remarked that in the past 15 years, the government introduced large budgets despite lacking the capacity for full implementation. He believes that a more realistic, smaller budget is preferable.

“We hope the finance adviser will be able to present a well-structured budget that reflects the recommendations of the financial task force and the white paper formulation committee,” he added.