Budget size set to decrease by Tk7,000 crore to Tk7.90 lakh crore next fiscal year

Highlights:

• FY26 budget to be Tk7.90 lakh crore
• Deficit estimated at Tk2.26 lakh crore
• Budget size mainly reduced in development sector
• Revenue target to be increased to Tk5.18 lakh crore

The finance ministry has decided to reduce the budget for the next fiscal year 2025-2026 (FY26) to Tk7.90 lakh crore, a Tk7,000 crore drop compared to the original budget for the current fiscal year, officials familiar with the matter said.

If implemented, this will mark the first time since the country's independence when the size of the new budget will be smaller than the previous year. 

The decision to reduce the budget size was taken at a meeting of the Coordination Council on Monetary, Currency and Exchange Rates, chaired by Finance Adviser Salehuddin Ahmed today (15 April), officials familiar with the matter told The Business Standard.

The budget will be constrained due to a lack of expected progress in revenue collection, a decline in foreign loans and grants, and the removal of unnecessary projects from the annual development programmes, officials said.

Finance Division officials have said that the size is being reduced to make the budget "feasible".

Speaking on condition of anonymity, Finance Division officials said the budget size has been reduced mainly in the development sector.

In the upcoming fiscal year, the allocation for the Annual Development Programme (ADP) has been decided at Tk2.30 lakh crore, down from Tk2.65 lakh crore in the current fiscal.

Explaining the reasons behind the reduction, ministry officials said most of the mega projects undertaken during the Awami League government have been implemented, and the current interim government has taken a policy decision not to undertake mega projects.

In addition, the number of projects in the next fiscal year is decreasing due to the cancellation of projects that were politically motivated during the Awami League government. As a result, spending on development projects in the new fiscal year will decrease.

Meanwhile, despite the reduction in the budget size, the National Board of Revenue (NBR)'s revenue target is not decreasing but rather increasing in FY26.

"The Finance Division is setting a revenue target of Tk5.18 lakh crore for the revenue board for the next fiscal year," said one official, adding that the NBR has, however, proposed to keep the target within Tk5 lakh crore.

The NBR's revenue target in the current fiscal year's budget is Tk4.80 lakh crore. However, as revenue collection was much lower than the target, the target has been reduced by about Tk50,000 crore in the revised budget.

The budget deficit for the next fiscal year has been estimated at Tk2.26 lakh crore.

Officials said the Finance Division is trying to keep the deficit target limited to reduce borrowing from domestic sources at high interest rates.

Of this, more than half will be borrowed from foreign sources and the rest from banks and savings certificates, they added.

The officials also said the division is estimating GDP growth at 5.5% and inflation at 6.5% in the new fiscal year budget.

The current fiscal year budget had estimated GDP growth at 6.5% and inflation at 6%. 

However, in the revised budget, the Finance Division has estimated GDP growth at 5.25% and inflation at 8.5%.