Govt mulls significant budget expenditure increase to address global crises, fulfil electoral pledges: Officials

Highlights: (For FY27)

• Budget size may be Tk9.10 lakh crore (approx)
• Revenue income Tk6.40 lakh crore (approx)
• Non-tax revenue Tk65,000cr
• Deficit Tk2.70 lakh crore
• Two-thirds of the budget to be spent on operations
• Allocation for social safety net programmes will rise
• Additional allocation will be required for subsidies
• Target to bring inflation below 8%

The BNP government has planned a significant increase in budget expenditure, according to two senior officials who attended a high-level meeting yesterday (10 April).

The primary drivers of this expansion in the upcoming 2026-2027 fiscal year include addressing global risks, increasing spending on subsidies and social safety nets, servicing higher interest payments, and implementing partial salary increases for people under state employment.

These decisions were reached last night during the second meeting for the 2025-26 fiscal year of the government's financial, monetary, and exchange rate coordination council.

Chaired by Finance Minister Amir Khosru Mahmud Chowdhury, the meeting was held via an online platform and attended by the Bangladesh Bank governor, finance secretary, Financial Institutions Division secretary, National Board of Revenue (NBR) chairman, Economic Relations Division (ERD) secretary, various ministry and department secretaries, and senior officials from the Finance Division.

A senior official who attended the meeting told The Business Standard, on condition of anonymity, that the session concluded quickly as the finance minister, finance secretary, and ERD secretary were scheduled to depart for Washington last night to attend IMF meetings.

The group will reconvene to discuss budget formulation upon their return from Washington.

Another senior official who attended the meeting told TBS, requesting anonymity, that the preliminary budget size for FY27 is set at approximately Tk9.1 lakh crore.

However, the final figure may fluctuate depending on the improvement or deterioration of global conditions, including the US-Israeli war on Iran, the official said, adding that the government expects a GDP growth rate of 6.5% for the coming fiscal and has set a target to bring inflation within 8%.

'Inherited limitations'

Yesterday, the finance minister told Parliament, "We have begun the work of formulating the 2026-27 budget while establishing discipline in various sectors of the economy and facing multifaceted pressures."

"We are fully aware of the people's immense expectations from the first budget of the newly elected government. Conversely, we hope the public will consider the limitations inherited from various problems we have received," Khosru said.

He added, "Our goal for this time is not just growth, but building a sustainable, transparent, and inclusive economy."

The original budget for the current 2025-26 fiscal was Tk7.9 lakh crore, which was later adjusted to Tk7.88 lakh crore in the revised budget by trimming development expenditures while increasing subsidies and non-development spending.

The second official mentioned that for the upcoming fiscal year, the government is planning to collect approximately Tk6.4 lakh crore in revenue. The remaining budget deficit is projected at Tk2.7 lakh crore, which will remain within 5% of GDP, they added.

Of this deficit, about Tk1.5 lakh crore is expected to be met through domestic borrowing. The remaining Tk1.2 lakh crore is planned to be sourced from foreign loans, a large portion of which the government hopes to receive as budget support, according to the senior official.

It is reported that the government will reduce value-added tax (VAT) exemptions to increase revenue collection and will intensify the digitisation of revenue collection activities.

The finance minister has instructed the revenue board to formulate a plan to raise the tax-to-GDP ratio to 10% by FY2027-28.

Additionally, the meeting reportedly decided to reduce the cost of doing business and revive closed factories.

The senior official clarified that approximately 67% of the upcoming national budget will be allocated to the operational sector, while 33% is designated for the development sector.

Subsidies will rise

While the BNP government will initiate new development projects, there are no plans for major expenditures on them for the time being, they noted.

The official explained that due to rising oil and gas prices in the international market caused by the Iran crisis, subsidies for electricity, energy, agriculture, and fertiliser will increase in the next fiscal year.

Beyond this, additional costs will be incurred to implement the new government's electoral pledges, the official said, adding that consequently, while expanding the budget is a pressure for the government, it has become a necessity.

The finance minister informed the House yesterday that the prices of fuel oil and LNG in the international market have more than doubled.

As a result, the government will have to provide approximately Tk36,000 crore in additional funds beyond the allocated subsidies for electricity, fuel, and LNG during the March-June period of the current financial year, he said.

Promises

The government plans to bring five million families under the Family Card programme in the coming fiscal year.

The government will also provide Farmer Cards to genuine farmers, fishermen, and livestock breeders.

Under the Notun Kuri Sports programme, scholarships will be provided to talented athletes aged 12-14.

Furthermore, the BNP government must also manage the costs of salary increases for government employees.

The state expects to spend approximately Tk1 lakh crore on these initiatives in the next fiscal year.

Additionally, the BNP government will have to incur extra costs to fulfil its pledge of creating employment opportunities.