Annual budget not to rise in FY26 due to financial crisis

The government has decided to downsize the annual budget in the upcoming 2025-26 fiscal year. Low revenue collection, sluggish growth in tax and duties, and rising foreign loan repayments prompted the authorities to take this decision. 

According to finance ministry sources, the next budget is likely to be similar to the current one, or lower than it, as the government decided not to increase the annual budget. 

The budget for the current 2024-25 fiscal year was originally set at Tk 7.97 trillion, but the interim government has taken an initiative to revise it down to Tk 7.5 trillion. The previous fiscal year (2023-24) had a budget of Tk 7.61 trillion, and it was later reduced to Tk 7.14 trillion. 

Regarding the upcoming budget, finance adviser Salehuddin Ahmed told Prothom Alo that they have to downsize the next budget due to various reasons, while the Annual Development Programme (ADP) will also face cuts. No new major projects will be undertaken, but funding for ongoing large-scale projects will continue.

According to finance ministry sources, the budget will prioritise rural infrastructure to generate employment.

In this regard, adviser Salehuddin Ahmed said the rural infrastructure sector has long been overlooked. They will try to raise allowances of social safety beneficiaries and meet the demands of the teachers in the new budget.

He also indicated that there will be reflections of the July movement spirit and recommendations of the white paper formulation committee and the task force.  

Despite the budget constraints, expenses on salaries, allowances, and domestic and foreign debt repayments will see a slight rise. However, there will be no significant increase in development spending. 

With no functioning national parliament, finance adviser Salehuddin Ahmed will present the budget on television in early June, and it will be endorsed through an ordinance by the president. Typically, the finance minister presents the budget before the parliament. Since there is no political government, the budget will be presented before the nation through television, similar to instances in the previous caretaker governments. 

The National Board of Revenue (NBR) arranges a major portion of the annual budget. Its revenue collection target for the current fiscal year was Tk 4.8 trillion, and it was later revised to Tk 4.63 trillion. In the first seven months (July-January), the revenue board collected only Tk 1.96 trillion, falling short by Tk 510 billion. 

The authorities have already started writing the budget speech. To ensure an inclusive budget speech, finance secretary Khairuzzaman Mozumder issued letters to secretaries of all ministries to submit proposals concerned with their respective sectors by 15 March. 

The government aims to reduce inflation to 7 per cent in the next budget, down from the persistent double-digit rates recorded over the past year. Last month, inflation finally dropped below 10 per cent after 10 consecutive months.

The budget deficit for the current fiscal year was estimated at Tk 2.56 trillion, or 4.6 per cent of GDP. The government is planning to keep the next year’s deficit below 5 per cent of GDP. The GDP growth target for the 2025-26 fiscal year is being set at 5.5 per cent.

Selim Raihan, executive director of the South Asian Network on Economic Modeling (SANEM),  said the authorities created confusion with large budgets in the last 15 years, despite having no ability for implementation. From this point of view, a smaller budget is better. 

“We hope the finance advisor will be able to present a good budget with reflections of the recommendations of the financial task force and the white paper formulation committee,” he said.