The interim government is likely to unveil a national budget of Tk 7.90 trillion for the upcoming fiscal year 2025-26 on June 2 in an effort to cope with the current economic realities.
The proposed budget is Tk 70 billion smaller than the current fiscal year’s budget — marking the first time since independence that the budget size is set to shrink year-over-year.
The decision to reduce the budget size comes as part of efforts to align with contractionary monetary policies aimed at curbing inflation, while also ensuring the budget remains realistic and implementable.
According to finance ministry sources, the decision was made during a meeting of the Coordination Council and Budget Management Committee, led by Economic Adviser Salehuddin Ahmed. Finance Secretary Khairuzzaman Mozumder presented a detailed proposal on the upcoming budget during the session.
The planned cut in the budget size will be done mainly in the development expenditure segment, while the revenue budget is set to rise in the next fiscal year, official sources added.
As there is currently no active parliament, the budget will not be presented in the legislature. Instead, the finance adviser will announce the budget via a televised address, ahead of the Eid-ul-Azha holidays.
Although budgets are typically announced on Thursdays, this year’s announcement is scheduled for Monday, June 2.
Following tradition, a post-budget press briefing is also expected after the announcement.
Despite the reduced budget size, the new budget will prioritize reducing inequality and offering relief to low-income groups impacted by inflation.
The government plans to increase both the number of beneficiaries and allowance amounts under various social safety net programs. Additionally, key sectors such as agriculture, health, education, and technology will receive priority funding.
For the next fiscal year, the government is projecting a GDP growth rate of 5.5%, down from the current year’s target of 6.75%. However, forecasts from the World Bank, IMF, and ADB suggest growth could be significantly lower.
In terms of inflation, the government aims to bring it down to 6.5% by the end of FY2025-26 — the same target set for the current year. Yet, as of March, the year-on-year inflation rate stood at 9.35%.
This year, the government is shifting focus towards reducing the budget deficit and enhancing macroeconomic stability.
The budget deficit for the new fiscal year is projected at Tk 2.26 trillion — down from Tk 2.56 trillion in the current fiscal year. Over half of the deficit is expected to be financed through foreign loans, with the remainder sourced from banking channels and savings instruments.
While overall budget size is shrinking, allocations for non-development (operating) expenditures are set to increase. The new budget may allocate Tk 5.45 trillion to this segment, compared to Tk 5.07 trillion in the current year.
On the other hand, development expenditure is expected to decrease to Tk 2.45 trillion, with the Annual Development Programme (ADP) receiving Tk 2.30 trillion — down from Tk 2.81 trillion and Tk 2.65 trillion respectively this year.
The reduction in development spending is linked to the completion of many mega-projects initiated under the previous Awami League government.
The interim government has adopted a policy of not taking on any new mega-projects, and several politically driven projects from the past administration have been scrapped — resulting in fewer projects in the pipeline for the next fiscal year.
Given the lack of significant progress in revenue collection and reduced foreign loans and grants, the ADP has been streamlined by eliminating unnecessary projects to match fiscal realities.
Despite a trimmed-down budget, the revenue target for the National Board of Revenue (NBR) is set to rise. The new fiscal year’s budget may set a target of Tk 5.18 trillion in revenue collection through NBR, compared to Tk 4.80 trillion in the current budget.
However, due to underperformance, the revised target this year was cut by nearly Tk 500 billion. While NBR had initially proposed to keep the target within Tk 5 trillion, the government has opted to increase the pressure on the tax authority to meet a higher collection goal.