Govt plans big-spend budget for jobs, growth amid revenue doubts
Inflation control, farm support, better healthcare, and creative economy are among top priorities.
The newly elected BNP government is preparing a large expansionary budget in its first fiscal plan, aimed at meeting public expectations, accelerating development activities to create jobs, and restoring the economy to a higher growth trajectory through increased investment.
For the fiscal 2026-27, the government is planning to spend Tk9.30 lakh crore – up by 25% from the current fiscal year's budget, while the finance ministry is expected to set a revenue collection target of Tk6.95 lakh crore, according to budget documents drafted by the finance ministry.
If approved, the revenue agency will have to chase a target which is higher by Tk1,00,000 crore than that of the current year, a level economists consider beyond its existing capacity.
The National Board of Revenue (NBR) is facing a shortfall of nearly Tk72,000 crore against its target in the first eight months of the current year.
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To mobilise additional revenue, the NBR may have to reduce tax exemptions across multiple sectors, raise value-added tax rates, and shift tariffs towards more market-based structures.
Fahmida Khatun, executive director of the Centre for Policy Dialogue (CPD), said budget sizes typically grow by 12% to 15% annually, but the government is planning an increase of more than 25% to fulfil multiple commitments, making revenue mobilisation the central challenge.
"The main problem with the projected budget is the fiscal constraint and how to generate the required funds. How will so much money come? " she said.
She added that achieving such revenue targets with the current capacity of the NBR is unrealistic, and the government should instead set more achievable targets and focus on implementation.
Priorities in budget
The current fiscal year's budget stands at Tk7.90 lakh crore in the original estimate and Tk7.88 lakh crore in the revised version, with the NBR revenue target set at Tk5.03 lakh crore. By the end of February, revenue reached Tk2.50 lakh crore.
According to draft budget documents presented by the finance ministry at a meeting on Friday, the proposed budget prioritises welfare-based initiatives such as Family Card and Farmer's Card, in line with the election manifesto. It also focuses on containing inflation and maintaining macroeconomic stability.
Other key priorities include skills development to promote entrepreneurship and expand domestic and overseas employment, accelerating growth, strengthening agricultural support, expanding healthcare, restoring discipline in the financial sector, and removing investment barriers through deregulation.
The budget also places emphasis on developing the creative economy, including film, music, sports, and rural culture. The government has already initiated recruitment of sports and music teachers in primary schools and introduced incentive schemes for athletes.
Deficit financing
The next budget sets a revenue collection target of Tk6.04 lakh crore, equivalent to 9.21% of GDP. However, the tax-to-GDP ratio has fallen below 7% and continues a long-term decline.
To raise revenue, the government plans digitalisation of tax administration, expansion of the tax base, stronger institutional capacity, and higher non-NBR collections.
The finance ministry has also sharply raised the non-NBR tax target. Against Tk5,786 crore collected in the first eight months of the current fiscal year, the target for next year is Tk25,000 crore.
The fiscal deficit is projected at Tk2.35 lakh crore, or 3.4% of GDP. While the current fiscal year's original budget was smaller than the previous year, its deficit was also set at 3.4% of GDP, higher than the next budget's projection.
The deficit financing plan includes borrowing Tk1.19 lakh crore from banks and savings certificates, and Tk1.16 lakh crore from foreign sources.
In managing the deficit, the government is expected to shift towards lower-interest foreign loans instead of high-cost domestic borrowing. A significant share of annual budget expenditure on interest payments goes to domestic bank loans and savings instruments.
The finance ministry has projected Tk1.27 lakh crore for interest payments, of which Tk1.05 lakh crore is allocated for domestic debt interest and Tk22,500 crore for foreign debt interest.
Finance officials said, if energy prices rise, inflation does not ease, or liquidity recovery in the financial sector is delayed, the government may face higher interest payment pressures on domestic borrowing.
The IMF generally considers a deficit within 5% of GDP manageable. The government is, however, aiming for tighter fiscal discipline. Still, shortfalls in revenue could force additional borrowing.
The Annual Development Programme (ADP) allocation is set to rise by 50% from the current revised budget to Tk3 lakh crore, which officials expect will boost public investment and employment.
Finance officials said project public investment will reach 6.5% of GDP next fiscal year, arguing that each taka of government spending can attract multiple times more private investment. Private investment is therefore expected to rise to 24.9% of GDP.
Subsidy pressure to grow
Despite the large overall budget, subsidy allocations have not been fully adjusted for rising fuel import costs amid instability in the Middle East.
Allocations include Tk37,000 crore for power, Tk6,500 crore for LNG imports, Tk27,000 crore for fertiliser, and Tk9,600 crore for food assistance, taking total subsidies, incentives and cash support to Tk116,125 crore, up from Tk112,455 crore in the revised budget of the current fiscal year.
The finance minister told Parliament that the Iran conflict alone added Tk36,000 crore in subsidy pressure between March and June due to higher global fuel prices. Budget documents warn that prolonged instability could further increase funding needs for gas, electricity and fertiliser subsidies.
Additional funding pressures may arise from the BNP government's election pledges, including family and farmer cards. The government has begun paying Tk2,500 monthly to low-income households under these schemes, alongside Tk9,600 crore for broader social protection programmes.
In the current fiscal year, this allocation was Tk9,663 crore in the original budget and Tk10,214 crore in the revised budget.
In the next fiscal year, allocations for agricultural incentives, export cash support and jute exports remain unchanged, while remittance-linked incentives rise by Tk800 crore to Tk7,000 crore.
ADP allocations also show a sharp increase in health spending to Tk20,608 crore, about six times the revised level, lifting the sector from 15th to third position.
The largest development allocations go to the Local Government Division and Roads and Highways Division, followed by power, primary education, and secondary and higher education.
