The interim government, led by Prof. Muhammad Yunus, is expected to take a pragmatic approach in drafting the national budget for the next fiscal year, prioritising economic stability and necessary reforms over populist measures.
Unlike the previous Sheikh Hasina administration, which faced criticism for excessive expenditure, the Yunus government is likely to curb politically motivated projects and focus on much-needed economic restructuring, according to finance ministry sources.
Key priorities for the budget include addressing high inflation, ensuring food security, promoting socio-economic development, and tackling challenges associated with Bangladesh’s transition from a Least Developed Country (LDC).
The government also plans to expand the social safety net and increase allowance amounts in the FY2025-26 budget starting in June.
Fiscal Reforms and Budget Planning
The International Monetary Fund (IMF) has advised the government to limit unnecessary development expenditure. Economic analysts emphasize the need for financial sector and tax regime reforms, which have been long overdue. With national elections approaching, experts argue that the upcoming budget must outline significant economic changes.
Dr. Zahid Hussain, former lead economist at the World Bank’s Dhaka office, stated, “The country requires a reformative budget for the 2025-26 fiscal year. We have seen large budgets before, but they lacked meaningful reform. If the current government follows that path, it could disappoint the public.”
A preliminary budget expenditure of Tk8.3 trillion has been proposed, up from Tk7.97 trillion in FY2024-25. Finance Adviser Salehuddin Ahmed recently presented a draft income and expenditure framework, which has been approved by the Chief Adviser, according to official sources.
Various ministries, divisions, and agencies have been instructed to submit detailed reports with relevant data and recommendations to the Finance Ministry by March 15.
These reports will focus on macroeconomic stability, governance reforms, inclusive growth, poverty reduction, women’s empowerment, and climate change initiatives.
Inflation Control Measures
Curbing inflation remains a top priority, with the government aiming to reduce the average inflation rate to 6.5% by FY2025-26. This will be supported by strict public spending controls and a contractionary monetary policy.
Inflation in Bangladesh has remained above 9% for over two years, with January 2025 figures showing overall inflation at 9.94% and food inflation at 10.72%.
To manage inflation, the Finance Ministry is considering restricting money printing for government lending unless absolutely necessary.
Reduced import duties and taxes on essential goods will continue, along with efforts to remove supply chain bottlenecks. Strengthening the Competition Commission has also been proposed to prevent price manipulation.
The Macroeconomic Wing of the Finance Division has launched a research initiative to identify further anti-inflationary measures, with recommendations expected in March.
Expansion of Social Safety Net Programmes
The government plans to increase both the amount and coverage of social safety net allowances. Currently, 6 million elderly citizens receive Tk600 per month, while 2.77 million widows and spouse abuse survivors get Tk550 per month. The upcoming budget may raise these allowances by Tk150 to Tk200 per month.
Other social safety programmes benefiting marginalised groups, including transgender individuals, tea workers, and people with disabilities, are also expected to receive increased funding. Additionally, budget allocations for employment programs, food security initiatives, and the Vulnerable Group Development (VGD) program will be expanded.
The Finance Ministry has requested the Social Welfare Ministry to submit proposals regarding these increases, with final decisions to be made by the Advisory Council in early April.
Strengthening Food Security
Recent floods have resulted in a shortfall of 1.3 million tons in Aush and Aman rice production. As of January 7, government food grain reserves were 23% lower than the previous year. To address this, the government is importing 900,000 tons of food grains and maintaining fertilizer subsidies to stabilise production.
The agriculture subsidy budget has been revised from Tk210 billion to Tk280 billion and is expected to remain at this level in the next fiscal year. Similarly, Tk80.59 billion has been allocated for food subsidies, supporting Open Market Sales (OMS), Trading Corporation of Bangladesh (TCB), and food-friendly programs.
Job Creation and Economic Growth
Recognizing the slowdown in employment growth, the government plans to prioritise job creation in the budget. While some economists recommend keeping the budget below Tk8 trillion due to economic constraints, officials argue that controlled expansion is necessary to support employment initiatives.
To avoid excessive borrowing from the banking sector, which could crowd out private investment, the government aims to reduce its reliance on domestic loans while ensuring adequate funding for entrepreneurs.
The interim government is preparing a budget focused on economic stability, inflation control, and social welfare expansion. With an emphasis on fiscal discipline and structural reforms, the administration aims to lay the groundwork for sustainable economic growth ahead of the national elections.
