What will change when the fiscal year is shifted? What are the pros and cons?

The government has decided to change the country’s fiscal year. The new fiscal year will begin in April and end in March of the following year. Until now, Bangladesh’s fiscal year has run from July to June.

Once the new fiscal year is implemented, government planning will change. Development activities will follow a new schedule. People will also have to adjust some of their annual income and expenditure planning and tax-related arrangements. The accounting practices of private companies will also be affected.

A fiscal year is a one-year period used by the government for its financial accounting. Based on the fiscal year, the government prepares its budget, estimating how much revenue it will collect and how much it will spend. Allocations for development activities are also made according to the fiscal year, and the budget is implemented accordingly.

The size and growth of gross domestic product (GDP), inflation, the Annual Development Programme (ADP), customs duties and taxes, investment, domestic and foreign borrowing and liabilities, and the profit and loss accounts of government institutions are all calculated on the basis of the fiscal year.

The government decided to change the fiscal year at a Cabinet meeting yesterday, Monday. The new fiscal year will run from 1 April to 31 March of the following year. All accounts and calculations for fiscal year 2028–29 will be made according to this schedule.

The next fiscal year, 2027–28, will be a transitional year and will last only nine months. After that, the new fiscal year will begin in April 2028 and end in March 2029. The cycle will continue in this manner.

The government’s main argument is that the change will accelerate the implementation of development projects.

Bangladesh’s current fiscal year begins on July 1, at the onset of the monsoon. This makes it difficult to carry out infrastructure projects such as roads, bridges, drains and buildings. As a result, project implementation takes longer, costs rise and the quality of work suffers.

Under the new April–March fiscal year, the budget will take effect at the beginning of summer. This will allow construction work to move ahead during the dry season from April to June.

Another recurring problem is the surge in development spending at the end of the fiscal year. In June in particular, many contractors rush to complete projects. Every year, there are allegations that contractors hastily complete work and withdraw payments. Rainfall in June can also affect the quality of construction.

Infrastructure projects could begin as early as April, at the start of the fiscal year. The final four to five months of the fiscal year—from November to March—will also largely coincide with the dry season, potentially accelerating development work. This could reduce the disruption caused by the monsoon to infrastructure projects involving roads, bridges and buildings.

Moreover, since most of the second half of the fiscal year will fall during the dry season, the tendency to rush through construction work at the last moment simply to show projects as completed and withdraw funds could decline.

Consider an example. In fiscal year 2025–26, Tk 1.41 trillion was spent under the ADP. Of that, Tk 400 billion was spent in June alone—more than 28 per cent of the total expenditure in a single month.

Changing the fiscal year could make it easier for the government to implement development programmes, but it will also create some temporary challenges. The government’s accounting system will have to be aligned with the new fiscal calendar. Budget and financial management software and information systems will have to be modified. The accounting periods for profits and losses of both public and private organisations will also change.

Many private companies will also have to adjust their accounting systems following the change in the government’s fiscal year. Their tax arrangements and corporate accounting practices will need to be aligned with the new fiscal calendar.

Large companies conduct their accounting through software systems, and modifying these systems can be costly. With the change in the fiscal year, they will have to update their software, resulting in additional expenses.

Besides accounting software, private companies may have to adjust the schedules for budgeting, financial reporting and audits. The periods used to calculate their income, expenditure and taxes may also change.

However, the change in the fiscal year will not significantly alter how private companies calculate their profits and losses. Only the accounting period will change.

The change in the fiscal year will not have any major direct impact on people’s everyday lives. However, as the tax year and fiscal year will coincide, the period used by individual taxpayers to calculate income tax will change.

At present, taxes are calculated on income earned during the July–June period. Under the new system, tax returns will be filed and taxes paid based on income earned from April to March. The schedule for filing income tax returns will also change somewhat. For example, return submissions will begin on 1 April.

The periods for making investments to claim tax rebates and receiving other tax-related benefits will also change.

The Bengali New Year was introduced during the reign of Mughal emperor Akbar. At the time, the fiscal year began in April from the perspective of revenue collection.

Later, during the colonial period, Scottish economist James Wilson of the East India Company presented India’s first budget on 7 April, 1860. The fiscal year began in April from then on, and the system continued until the partition of India in 1947.

India subsequently retained the April–March fiscal year. Pakistan, meanwhile, changed its fiscal calendar in the 1950s and began following a July–June fiscal year.

After independence, Bangladesh retained the same system and continued to follow a July–June fiscal year.

In most countries around the world, the fiscal year runs from January to December. This is particularly common among developed countries. Countries that follow the January–December fiscal year include the United States, China, Japan, Germany, France, Brazil, Russia and South Korea. Neighbouring Sri Lanka also follows the January–December fiscal year.

Countries that follow a July–June fiscal year include Australia, Malaysia, Nepal and Pakistan. Countries with an April–March fiscal year include India and the United Kingdom. However, in many countries, the tax year and fiscal year do not necessarily coincide.

Selim Raihan, executive director of the private research organisation South Asian Network on Economic Modeling (SANEM), told Prothom Alo that the decision to change Bangladesh’s fiscal year from July–June to April–March is a promising initiative for economic management. By reducing the mismatch between the monsoon season and the implementation schedule of development projects, the change could have a positive impact on the speed and quality of project implementation.

According to Selim Raihan, merely changing the fiscal calendar will not eliminate longstanding problems such as delays in development projects, delays in fund disbursement or weak implementation capacity. Rather, implementing the new framework will require significant coordination among budget planners, revenue authorities, government accounting systems and relevant institutions.

Therefore, while the decision should be viewed as a positive reform, attention must also be paid to how systematically and efficiently it is implemented. If adequate preparation, accountability and oversight are ensured, changing the fiscal year could become an important step toward making Bangladesh’s development activities and financial management more effective.