The upcoming budget: Where should it focus?

In a few weeks, Bangladesh's budget for the next fiscal year will be presented in the National Parliament. Discussions, debates, and exchanges of views about the budget are already taking place among various groups, economists, and experts. Different opinions, perspectives, and recommendations are emerging. Despite differences in reasoning, there is consensus on one point: the upcoming budget is being prepared at a time of deep economic crisis.

One source of this crisis is, of course, global - arising from conflicts such as the Iran war, leading to energy problems and trade risks. The other source is domestic- ranging from economic stagnation to rising debt burdens, subsidy pressures, resource shortages, and increasing expenditures. Altogether, the 2026–27 budget will be presented in a fragile and vulnerable environment. In this context, three broad issues regarding the upcoming budget are important.

First, what will be the philosophy of the budget? What goals and perspectives will guide the 2026–27 budget of Bangladesh? We should bear in mind that a national budget is not merely an account of income and expenditure, nor just a numerical exercise. A country's budget is also a document reflecting the ruling government's development philosophy and economic priorities. Therefore, the people of the country expect the government to clearly and simply present its vision and priorities so that citizens can understand the future direction of the economy.

Second, the budget should be oriented toward the expectations of ordinary people. People hope that the economic challenges they face in daily life will be addressed in the budget with empathy. Their key needs would be reflected in the budget, along with necessary policy measures and allocations to meet those needs. This would also ensure the accountability of the state to its citizens.

Third, the budget must clearly specify which macroeconomic challenges would be prioritized and addressed in the budget. People want to see concrete policies and resource allocations aimed at resolving the structural challenges facing Bangladesh's economy, as these directly affect their well-being.

From the standpoint of philosophy and priorities, the upcoming budget should clearly state whether it emphasizes human development or merely economic growth. How pro-poor and inequality-reducing will it be? Will it protect marginalized groups or favour the wealthy? What will be at its core—human welfare or material prosperity?

Given both global and domestic conditions, the budget must strike a delicate balance between two considerations. Due to limited resources, the budget size should not be excessively large. At the same time, it should not be so conservative that investment and growth are severely constrained. 

A stable, moderate size is necessary. This may require postponing or scaling down large prestige projects and focusing instead on essential economic activities. Another balance must be maintained between what is "necessary" and what is "important." Alongside essential spending (e.g., productive sectors), the budget must also include reforms (e.g., tax system improvements).

In the context of bringing economic relief to their lives and living, people may want the budget to focus on some specific issues. First, the ongoing energy crisis has severely disrupted the daily life of citizens, and there is fear it may worsen. People want assurance that energy supply will be maintained and that pricing will remain fair. They expect appropriate policies and allocations in the budget to that goal.

A country's budget is also a document reflecting the ruling government's development philosophy and economic priorities.

Second, Bangladesh has long suffered from high inflation, which has made essential goods increasingly unaffordable. Many items are now beyond the purchasing power of ordinary people. The interim government's budgets have not delivered effective results in this regard. People expect better outcomes from an elected government. While they do not expect inflation to drop overnight, a downward trend would restore their confidence.

Third, there is widespread dissatisfaction with both the quantity and quality of social services such as education and healthcare. There is also frustration over historically low budget allocations in these sectors - less than 3 per cent of GDP, compared to much higher levels in neighbouring countries. People expect at least 5 per cent of national income to be allocated to social services.

At a macro level, the budget must focus both on economic stability and economic growth. Stability is not only important for controlling inflation or reducing trade deficits but also for meeting conditions set by development partners and lenders. Growth, on the other hand, is essential for economic expansion.

To achieve these goals, effective measures to reduce inflation are necessary. Conservative monetary policy alone has proven insufficient; fiscal policy and institutional reforms must also play a role. Reducing the trade deficit will require boosting exports and curbing imports, though this is undoubtedly complex.

For a country like Bangladesh, inclusive growth is essential. It helps reduce inequality and disparities. This requires increasing employment and expanding small enterprises. The budget should include clear policies and programmes for job creation, especially for youth and women. Without targeted support and incentives for small enterprises, growth cannot be inclusive. Inclusive growth in Bangladesh rests on three key pillars: agricultural development, gender equality and women's empowerment, and environmental sustainability. Each of these must receive adequate policy attention and budget allocation.

All these priorities would require financing. On the expenditure side, several pressures are already evident - debt servicing, subsidies, administrative costs, as well as spending on social protection programmes, higher energy import costs, and commitments made by the interim government.

On the revenue side, there are significant constraints: economic slowdown, reliance on indirect taxes, and inefficiencies in the tax system. Bangladesh has no alternative but to increase reliance on direct taxes and raise the tax-to-GDP ratio. At the same time, challenges such as slowing garment exports, global trade barriers, declining remittances, low foreign investment, and limited access to foreign aid and loans will constrain foreign exchange availability.

Finally, budget projections must be realistic. Proposed programs and projects should have clear implementation plans and strong monitoring and evaluation frameworks. Given current global and domestic challenges, preparing an effective and realistic budget for the next fiscal year will be difficult—but not impossible.

Selim Jahan is an economist and former director, Human Development Report Office, UNDP

Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the opinions and views of The Business Standard.