Not allocation, implementation of budget key challenge amid macroeconomic strains: CPD

The Centre for Policy Dialogue (CPD) has termed the proposed macroeconomic targets for FY2026-27 ambitious, citing prevailing economic pressures such as high inflation, a liquidity crunch, and sluggish private investment.

Speaking at a quick-reaction press conference following the budget presentation in the national parliament, CPD Executive Director Fahmida Khatun stated that while the budget outlines necessary structural goals, its primary targets lack a realistic foundation.

The government has projected a GDP growth target of 6.5% and aimed to bring inflation down to 7.5%. "Given that GDP growth is projected to hover around 5% in the current fiscal year, aiming for 6.5% growth is highly ambitious," Fahmida said.  

She added that achieving this requires significant acceleration in private investment, industrial production, and export growth -- all of which face structural challenges like energy shortages and banking sector vulnerabilities.

Regarding inflation, she noted that reducing it from the current average of around 9% to 7.5% within a year requires strict policy coordination, including stabilising the exchange rate, improving food supply chains, and managing monetary and fiscal policies.

CPD expressed concern over the budget deficit financing strategy. To finance the deficit, set at 3.6% of GDP, the government plans to borrow Tk1.12 lakh crore from domestic banks.

"Heavy bank borrowing risks crowding out the private sector, potentially squeezing credit flow and raising interest rates for private enterprises," Fahmida warned.

On revenue mobilisation, the target of Tk6.95 lakh crore was described as a major leap. Historically, revenue collection has faced persistent shortfalls, and CPD argued that the underlying growth assumptions remain inconsistent with actual fiscal performance.

The think tank, however, welcomed certain positive measures, such as duty exemptions on solar panels and incentives for electric vehicles, calling them positive steps toward a green economy.

It also noted the marginal increase in GDP share for health and education allocations, though Fahmida cautioned that the quality of spending must be improved to avoid waste.

CPD executive director said, as this is the first budget of the government's current term, it is the opportune time to initiate tough structural reforms, such as separating NBR's tax policy from tax administration. "Implementation will require strong political will, administrative capacity, and a sustained long-term commitment," she said.