The national budget for the upcoming fiscal year is set to be presented in parliament in just a few weeks. Discussions and debates have already started among economists and experts, bringing forth a variety of opinions and perspectives. However, there is consensus on one fundamental point: the budget for the 2026-27 fiscal year is being introduced amidst a profound economic crisis. On one hand, the Iran-centric war has created energy problems and commercial risks, which are part of a global crisis. On the other hand, domestically, there are issues such as economic stagnation, a massive debt burden, subsidy pressure, and rising expenses despite resource shortages. This budget is being crafted in such a fragile and precarious situation.
During this difficult time, three overarching aspects seem extremely important for the upcoming budget. Firstly, the core philosophy of the budget. It’s vital to clearly understand the goals and perspectives on which the budget for the 2026-27 fiscal year will be formulated. It's crucial to remember that a country's budget is not just a calculation of income and expenditure or a mathematical process. It is a formal document of the ruling government's developmental philosophy and economic priorities. The general public wants the government's philosophy and priorities to be clearly and simply presented in the upcoming budget so that there is a transparent understanding of the future economic journey.
Secondly, the expectations of the public life. The budget should focus on the aspirations of the common people. Each level of society is facing economic challenges, and the budget should address these with appropriate empathy. It needs to ensure that the key needs of the people are included in the budget, with necessary financial allocations and guidelines to meet those needs. This is how the government's accountability to the general public is demonstrated.
Thirdly, addressing specific issues within the macroeconomic framework is essential. To address the current economic crisis in Bangladesh, the budget needs to include concrete policies and resource allocations. Public welfare and the well-being of citizens mostly depend on this. In terms of philosophy, it should be clear in the budget whether the government will focus on human development or mere GDP growth. The important question is whether it will aid in poverty reduction and inequality reduction or protect the interests of the wealthy class. It needs to be clearly defined whether human welfare or material prosperity will be at the centre of the budget.
In the current global and domestic context, maintaining a fine balance between two aspects in Bangladesh's budget is a significant challenge. Due to resource insufficiency, the budget should not be excessively large, nor should it be excessively conservative. Excessive conservatism risks constraining investment and growth. Therefore, the budget's size needs to be maintained at a stable level. To maintain this balance, it may be necessary to temporarily suspend or cut back on major prestigious projects and draw a line between the ''necessary'' and the ''important.''
Alongside focusing on production-oriented projects, emphasis should be placed on long-term reforms such as the tax structure.
When it comes to economic comfort, several specific demands are brought up. The energy crisis is currently wreaking havoc on public life. People expect specific announcements regarding maintaining uninterrupted energy supply and making price structures accessible to the general public.
Additionally, the instability created in the market of essential commodities by prolonged high inflation has devastated public life. The interim government hasn't shown effective results in the last two budgets on this issue, so expectations are now much higher from the elected government. Although inflation will not decrease instantly, even a trend of reduction would reassure the people.
There is significant public dissatisfaction regarding the quantity and quality of sectors like education and healthcare. Compared to neighbouring countries, our allocation in these sectors is much lower. Less than 3 per cent of national income is spent on these sectors, whereas people expect this to be raised to at least 5 per cent. This reflection should be seen in the budget.
Overall, in the upcoming fiscal year's budget, it is imperative to strike a balance between macroeconomic stability and growth. This is crucial not only for reducing inflation or the trade deficit but also for fulfilling the conditions of development partners' loans and economic expansion. It has already been proven that controlling Bangladesh's inflation through a solely conservative monetary policy is not possible. Therefore, coordination between revenue policy and institutional reforms should be in the budget. Besides, vigilant attention is needed for challenging tasks like increasing exports and seeking alternatives to imports to reduce the trade deficit.
In the context of Bangladesh, there is no alternative to inclusive growth. To eliminate inequality and disparity, employment generation is necessary on one hand, and the expansion of small enterprises on the other. The budget must include specific programmes for employment creation, especially for the youth and women. Outside this, special allocation on three main pillars: agricultural development, women’s empowerment, and maintaining sustainable environmental balance is indispensable.
However, a significant obstacle to implementing the aforementioned programmes in the budget is financing. On the expenditure side, there's the pressure of loan interest repayment and the weight of subsidies, and on the income side, there are substantial limitations. The inefficiency of the tax system and excessive reliance on indirect taxes have limited resource supply. Without increasing the tax-to-GDP ratio by focusing on direct taxes, achieving any goal isn't possible. Furthermore, concerns such as the sluggishness of the garment industry, lack of foreign investment, and declining remittances could complicate foreign currency supply.
Finally, the budget projections must be realistic. There should be a specific implementation plan and evaluation framework for each programme and project. Although formulating an effective and practical budget to resolve the existing crisis is challenging, it is by no means impossible.
#Selim Jahan is former director of Human Development Report Office, UNDP
*The opinions expressed are the writer's own.
#This article, originally published in Prothom Alo print and online editions, has been rewritten in English by Rabiul Islam