Bangladesh’s interim government borrowed to finance its operating expenses for the first time in decades, reflecting deep structural weaknesses in revenue mobilisation and mounting fiscal pressure, according to the Citizen’s Platform for SDGs, Bangladesh.
Presenting an economic review at a media briefing in Dhaka, Centre for Policy Dialogue (CPD) officials said the government borrowed Tk23,742 crore to cover a shortfall between revenue and operating expenditure in fiscal year 2025.
The briefing, held at BRAC Inn Centre, warned that the development marks a rare and concerning shift in fiscal management. According to the platform, no administration since the era of Hussain Muhammad Ershad had resorted to borrowing for operating costs.
Revenue shortfall drives borrowing
Towfiqul Islam Khan, additional research director at CPD, said the government’s operating expenditure stood at Tk4,59,796 crore against revenue earnings of Tk4,36,000 crore, forcing it to plug a gap of over Tk23,000 crore through borrowing.
“This reflects a combination of weak revenue mobilisation, economic instability and sluggish private investment,” he said, adding that the interim administration has also faced pressure from clearing outstanding liabilities inherited from the previous government.
The findings highlight a growing imbalance between income and expenditure, raising concerns over fiscal sustainability at a time when the government is also expected to deliver on ambitious reform and welfare commitments.
Welfare plans face funding constraints
Among the major challenges identified is the proposed “family card” programme, a key electoral pledge aimed at supporting five million low-income households with monthly cash assistance of Tk2,000–2,500.
The programme is expected to cost between Tk9,600 crore and Tk12,000 crore annually—equivalent to about 0.15–0.20% of GDP—posing a significant burden on already strained public finances.
CPD Distinguished Fellow Debapriya Bhattacharya cautioned that financial constraints would be the biggest hurdle in implementing the scheme.
He stressed that beneficiary selection must follow internationally accepted methods, such as proxy means testing, rather than administrative or political considerations, to ensure that support reaches the truly vulnerable.
Bhattacharya also advised delaying the rollout of the programme until after local government elections, warning that premature implementation could increase risks of mis-targeting and corruption due to inadequate data.
Ambitious growth targets under strain
The platform also flagged the government’s target of raising Bangladesh’s GDP to $1 trillion by 2034 as highly ambitious under current conditions. From an estimated $462 billion economy in FY2025, achieving that goal would require average annual growth of around 9% in dollar terms.
However, weak revenue performance remains a key bottleneck. The tax-to-GDP ratio stood at just 6.8% in FY2025, with a target of 8.3% set for 2026—an increase analysts say will be difficult to achieve without major reforms.
Even with steady progress, the country would need to raise the ratio by nearly one percentage point annually to reach around 11.5% by 2031. With effective reform measures, CPD estimates that an additional 2% of GDP in revenue could be mobilised in the short term, potentially pushing the ratio to 13.3%.
Reform urgency grows
Khan warned that even strong revenue growth may not be sufficient to contain the budget deficit within 4–5% of GDP while simultaneously delivering on electoral commitments.
“The ability to achieve these targets will depend on macroeconomic stability, effective reform implementation and stronger revenue administration,” he said.
The briefing underscored that the government’s immediate reliance on borrowing for routine expenditures is not just a short-term fiscal challenge, but a signal of deeper structural issues—making revenue reform, expenditure discipline and policy prioritisation critical in the months ahead.