FY26 budget targets fiscal discipline, reducing deficit and inflation: Wahiduddin Mahmud

Bringing economic stability, reducing inflation, and restoring fiscal discipline will be the key goals of implementing the upcoming fiscal year's budget, said planning adviser Wahiduddin Mahmud.

He stated that emphasis would be placed on curbing public spending and reducing the budget deficit. At the same time, efforts will be made to ensure economic growth does not fall below 4%.

He made these remarks during a press conference following the meeting of the National Economic Council (NEC), which was chaired by Chief Adviser Muhammad Yunus and held in the NEC conference room at Sher-e-Bangla Nagar today (18 May).

The planning adviser said that to establish a sustainable budget management system, the budget deficit must be reduced, and the burden of existing debt should be lowered. Subsidies will also be reduced, although this cannot happen abruptly.

He noted that continuous budget deficits risk creating a debt trap. Currently, both foreign and domestic loans are used to finance the deficit, which increases the debt repayment burden later. These loans support both development and operating budgets, creating a vicious cycle. To break out of this cycle, efforts will be made to increase revenue – although rapid increases are not feasible.

Wahiduddin Mahmud described the upcoming budget as one of restoring discipline, not an irresponsible budget. There will be no expenditures which will temporarily appease the public but ultimately burden future budgets.

He explained that many types of spending — such as those funded by printing money — do not immediately affect inflation but exert pressure in subsequent years. Similarly, any significant salary hike won't cause immediate inflation but will impact the economy months later. For this reason, the current government will act responsibly and avoid passing on unsustainable burdens to future governments.

For the same reason, long-term projects are not being included in the development budget, and no new mega projects are being initiated — except for the Matarbari development project, which was already in progress. This project is being financed by Japanese loans, which are long-term in nature. To avoid increasing the debt burden, no short-term or high-interest loans are being taken.

He said managing the upcoming budget sustainably will be difficult. Still, to ensure long-term sustainability, the government is paying off foreign debt obligations — for instance, clearing outstanding bills in the energy sector — despite the current financial strain.

The planning adviser added that if asked about the current development strategy, he would note that strategic prioritisation cannot be done in just one year. The previous political government initiated a large number of projects in the Annual Development Programme (ADP), making it impossible to complete them all in a timely manner. This has led to what's being called "project overload."

Unless these ongoing projects are completed, it would be wasteful for the government. Therefore, it's hard to define a new development strategy without finishing the existing projects, he added.

He also said that although operating expenditure in the health sector may not be immediately visible, it will increase by the end of next year when 2,500 health workers, doctors, and nurses will be recruited. Meanwhile, in education, steps are being taken to increase salaries and benefits. Arrears in pensions and welfare allowances are being cleared after a long delay.

Wahiduddin Mahmud noted that the budget for the current fiscal year is likely to be lower than in previous years. The government has cut many projects after careful evaluation. Several projects initiated under the previous government have been revised to reduce waste. Additionally, many contractors abandoned their work, and although some work has resumed, it will affect the overall implementation rate.

The planning adviser pointed out that long-standing deprivation and inequality at various levels during past political regimes have sparked daily protests. Protesters now expect the interim government to fulfil their demands immediately. Since these demands are tied to financial commitments, the interim government cannot fulfil them all.

He clarified that this administration has come to enact reforms — not to meet every demand. He questioned why this interim government alone is expected to resolve all grievances, posing the question to journalists.

Meanwhile, the National Economic Council (NEC) has approved a Tk2,30,000 crore Annual Development Programme (ADP) for fiscal year 2025–26 — a significant reduction from the current fiscal year's original ADP, aligning with the interim government's austerity efforts and cuts to low-priority projects.

The approved ADP marks a 13.20% or Tk35,000 crore reduction from the original ADP of the current fiscal year, but a 6.48% or Tk14,000 crore increase compared to the revised ADP.

The government's allocation for FY26 is Tk1,44,000 crore, marking a 12.72% decrease from the original allocation for the current year, but a 6.66% increase compared to the revised one.

Foreign aid for the upcoming ADP has been cut by Tk14,000 crore, down to Tk86,000 crore compared to the current year's ADP. However, it has risen by Tk5,000 crore from the revised ADP.

The ADP for fiscal year 2025–26 will be financed by 62.62% from government funds and 37.39% from foreign loans and grants.

A total of 1,171 projects with allocations have been included in the new ADP. Of these, 993 are investment projects, 19 are feasibility study projects, 99 are technical assistance projects, and 60 are self-financed.

In the education sector, Tk28,557 crore has been allocated for 91 projects in FY26 — Tk2,971 crore less than the Tk31,528 crore allocated in the current ADP.

In the health sector, Tk18,148 crore has been allocated for 35 projects, down from Tk20,682 crore in the current ADP.

However, despite reductions compared to the original ADP, allocations for both sectors have increased relative to the revised ADP for the current fiscal year.

The planning adviser said that although the size of the revised current budget is larger than the new one, nearly all sectors have seen an increase in allocation — with education receiving the largest boost. Health did not receive as much due to unused infrastructure — some places lack doctors, others lack medical supplies. These gaps have shifted to the operating budget. Nevertheless, education was prioritised in the development budget.

He pointed out that many universities face dormitory shortages, and many schools require new buildings. It's not possible to increase spending across all sectors at once. For this reason, the current year did not see large increases in education and health budgets. However, he expressed hope that there will be more opportunities to expand funding in these sectors in the future.

As in previous years, the ADP for FY26 allocates the highest share, up to 70%, to five sectors out of the 15 sectors. These sectors are - Transport and Communications, Power and Energy, Education, Housing and Community Facilities, and Health.

The highest allocation in the new ADP, Tk58,973.4 crore, has been given to the Transport and Communications sector, which accounts for 25.64% of the total ADP. The Power and Energy sector has received Tk32,392.26 crore, representing 14% of the ADP allocation.

The Education sector has been allocated the third-highest amount, Tk28,557.43 crore (12.4%). The Housing and Community Facilities sector has received Tk22,776 crore, while the Health sector has been allocated Tk18,148 crore.

Ministry and division-wise ADP allocation for FY26

A total of 74.40% has been allocated to 10 ministries and Divisions. The Local Government Division received the largest share, with Tk36,098.76 crore—accounting for 16.47% of the total ADP.  

After the Local Government Division, the ministries and divisions receiving the highest allocations in the ADP are as follows-the Road Transport and Highways Division has received Tk32,329.57 crore, accounting for 14.75% of the total ADP.

The Power Division has been allocated Tk20,283.62 crore (9.25%), followed by the Secondary and Higher Education Division with Tk13,625 crore (6.21%), and the Ministry of Science and Technology with Tk12,154.53 crore (5.54%).

The Health Services Division received Tk11,617.17 crore (5.30%), while the Ministry of Primary and Mass Education was allocated Tk11,398.16 crore (5.20%).

The Ministry of Shipping received Tk9,387.62 crore (4.28%), the Ministry of Water Resources Tk8,489.86 crore (3.87%), and the Ministry of Railways Tk7,714.99 crore (3.52%).

A total of Tk230,000 crore has been allocated in the new ADP. Of this, the largest share—Tk28,018.70 crore (11.74%)—has been earmarked for the construction of non-residential buildings. The second-highest allocation, Tk17,358.67 crore, has been set aside for the construction of roads and highways.

About 6.74% of the ADP, or Tk16,073.48 crore, will be spent on the procurement of electric equipment, while 6.63%, or Tk15,828.86 crore, has been allocated for land acquisition.

An allocation of Tk9,627.63 crore (4.04%) has been made for research and development, and Tk9,115.82 crore is reserved for rural infrastructure development.

In addition, Tk9,016.73 crore has been allocated for the construction of residential buildings, and Tk6,917.88 crore for the construction of other buildings.

Furthermore, Tk6,505 crore (2.73%) has been allocated for bridge construction, while Tk6,473.63 crore (2.71%) will go toward embankment construction.