Budget 2026-27: Proposed priorities and perspectives 

In the forthcoming National Budget 2026-27, the Government is committed to addressing key challenges the economy is faced with. It is expected the budget will include pragmatic programs to strengthen the key drivers of Gross Domestic Product (GDP) growth, control inflation, curb rising external debt, generate rural and urban employment, promote investment and entrepreneurship and significantly reduce poverty and inequalities. 

A brief review of the critical economic scenario is reflected through the following: (a) Tax-GDP ratio slackened to 6.8 percent in 2024-26 ) that remains the lowest in South Asia). Current revenue deficit will adversely impact government expenditure and slacken investment. (b) Inflation soared to 9.6% and this could deplete purchasing power, weaken real incomes and negatively impact living standards of vast majority of the population (c) Both absolute and relative poverty alarmingly increased in the past two decades ( 40% percent of the population remains below the optimal poverty zone as compared to 35 percent in 2007) (d) Employment (both urban and rural) decreased by 25%  ( 2020- 2025) with massive declines in formal education at college/university level. The recurring gap between domestic and external resources is likely to widen and thus trigger critical constraints in resource mobilisation for development expenditure. Simultaneously curtailed aid could weaken project implementation. If not addressed and mitigated in the medium-term,external debt could account for 25-30% of current revenue levels ( that could be classified as moderate debt with risk of escalation to high-debt risk) 

Given the above scenario, the Government may like to consider priority intervention with regard to the following aspects in the National budget 2026-27.

1. Optimum Budget Size within Three-Year Mid-term Budget Framework: 

Conventionally there are differences in opinion in what could be the optimal size of the budget. As addressing core challenges would require continuity of priority projects supported by adequate resources, the Government may consider a restructured Mid-Term Framework (MTF)  that could be operationally linked from current year's budget to the budgets for the next two years).This will also enable operational flexibility and facilitate adjustments in program and resource thrusts, enable strengthened monitoring and evaluation, and build up resilience to cushion external shocks. In this context the Government may consider taking into account how the previous MTFs worked and lessons derived. The current Budget should ensure thrust on the key economic indicators and easing inflation.

2. Proposed priorities for sectoral allocation of resources: 

In this budget, sector allocations should be structured to meet urgent requirements not only for the current fiscal year but also ensure fiscal space to enable relevant sector requirements for the next two years. For the current budget. priority allocations are proposed as follows: ) Energy & Infrastructure 20%), (Defense - 15% ) Education & Research -15%), (Agriculture & Food Security - 10%) Employment & Entrepreneurship - 10%) ( Health & Community Care- 10%) : Social Protection & Safety Nets - 10%) and Others ( 10%). For the next financial year allocations for sectors may vary subject to development priorities and resources available. The above allocation should retain inevitable linkages with how best and efficiently the Annual Development Programs ( ADP) should be implemented. 

3.  Enhancing  GDP Growth ( through stabilization,optimization and efficiency in key sectors): 

Immediate intervention is required to expand exports and overseas remittances to spur GDP growth. Current GDP growth stands at around 3.9 percent. Based on discussions with stakeholders, the forthcoming budget may incorporate short and medium term incentives to boost and diversify exports in the short to medium. Further stimulus to promote overseas remittances and boost exports may push GDP growth higher. Expanding potentials for diversification of exports and mechanisms of overseas remittances  will propel demand, broaden supply and strengthen leverages to sustain and promote sustained GDP growth. Government may consider envisioning modest increase in GDP growth to 6.00 for the fiscal year. Despite fiscal constraints, budget deficit should not exceed 5-6% of the GDP 

4. Enhancing Tax-GDP ratio and overall efficiency of resource mobilization:

Domestic resource mobilization remains a critical challenge. Efforts to enhance Tax-GDP ratio over past centered on a conventionally theoretical approach ie. mainly broadening tax coverage.The process of increasing revenue lacked coherent direction and focused implementation.Moreover there are continued concerns on transparency of the process. National Board of Review ( NBR) still lags behind with regard to  required tax restructuring,adjustments and overall operational mechanisms. Critical obstacles to revenue expansion relate to several factors - and there needs closer scrutiny beyond business as usual. Some of these include - tax-exemptions, insufficient corporate coverage, weak assessment of revenue strengths of informal sector, lack of due diligence in public recovery and retrieval  of assets, non-transparent transactions and outflow of funds contrary to public interest etc .Over and above, the practice of "whitening  black money" neither resulted in beefing up revenue nor in minimizing unethical transactions. Unless digitalization is reinforced by decentralized operational improvements, and viable transparency is ensured in the process of revenue mobilization and management,significant progress on this may further be delayed. 

As regards tax proportions ,a moderate approach could be feasible for this year's budget - ( like VAT- 50 %,  tax from income assets - 40%  and Customs 10 %). VAT coverage should be non-inflationary in nature and it should be ensured there is no undue pressure on low-income and middle-income segments of the population. 

Bangladesh Bank's adjustments in supporting exports like improvements to Export Development Fund should be able to generate availability of dollars to exporters at reasonably cheaper prices, and thus could stimulate export earnings, Similarly Remittance promotion incentives for expatriate Bangladeshis should be considered to enhance overseas remittances. 

Turn over tax ( at around 3-4%) may be of some relief to small business,as VAT relatively remains a burden. The proposed Finance Bill needs to conform to efficiency in allocation and implementation. Surcharge based on current taxation laws and ad-hoc levies or deficit financing may be considered for additional revenue.Multiple taxes ( as VAT, excise,TDS etc) if applied without due assessment may not only be addition burden on taxpayers, but also impede effective process of revenue mobilization. The  incentive by the government for meeting/exceeding tax targets certainly appears positive but impact would depend on whether due process diligence is applied in revenue collection.Key aspects of tax reform should be based on institutional and functional improvements if results are expected in the medium-term to long-term.

5. Expenditure Rationalization and Cost Effectiveness

There is urgent need to review how the trends and outcomes of how budgetary provisions impacted both development and non-development expenditure, over the span of past two decades. Budgets should therefore, focus on national economic priorities. As resources are scarce and costly, our budget should consistently aim at cost effectiveness through massive rationalization and relocation to sectors/areas that would have immediate impact in stimulating GDP growth. This remains a challenging exercise- mainly for public sector institutions - in terms of failure to determine priorities, absence of due diligence,
undue pressure groups etc.

6. Annual Development Program (ADP) implementation

Over the past several years, the Government as well as key Development Partners expressed concerns on weaknesses in project implementation. Undue  escalation in mega projects spurred financing limits and external debts. The Government recently outlined the criteria for project selection and implementation in order to achieve efficient results. This could gear up effective implementation of the Annual Development Program ( ADP). On the external sector, the budget may need to include provisions to minimize delays at start-up or completion. and worsening of  trade deficits, through inadequacies of transaction-generated and net capital inflows. Based on prolonged experiences with staggered ADP implementation there is no alternative to stringent monitoring and evaluation through a decentralized, restructured, accountable and operationally efficient Implementing,Monitoring. Evaluation Division ( IMED). 

7.  Strengthening Social Protection & Safety Nets: 

Poverty and inequalities increased significantly in the past two decades. Main reasons  include severe mismanagement and corruption and weak supply chains, fragmented financial and service delivery mechanisms. Currently 35% of the population remains beyond limits of absolute and relative poverty. Budget 2025-2026 should outline specific measures to address these challenges with utmost priority. Massive thrust is required for expanding and upgrading the Safety Nets and Social Protection mechanisms. Local government institutions must be strengthened ( with adequate stakeholders engagement) to effectively mitigate poverty and upgrading livelihoods and living standards.In this context roles and responsibilities of public representatives should be redefined and made more accountable.

8. Expanding employment and entrepreneurship:

With a view to expanding employment and promoting efficient entrepreneurship increased role of the private sector is extremely important, Therefore Government may consider budget allocation and policy support for a broadened and vibrant private sector. Side by side, strengthening Public Private Partnerships (PPPs) specifically for employment and entrepreneurship as well as program-based MOUs ( Memorandum of Understanding) would enable the private sector to align their programs to those undertaken by the Government.The budget may refer to required required strategies and funds for operationalizing 
such initiatives. 

9. Financial implications of shifting Bangladesh's LDC graduation to 2029: 

The United Nations agreed on Bangladesh"s LDC graduation effective September 2026. However later the UN Committee agreed on Bangladesh"s view to shift the schedule of LDC graduation to 2029. This will give the public and private sectors to gather required space and opportunities to strengthen the key growth elements and enhanced efficiencies and resilience following the LDC graduation. Compliance with key requirements would required charting and implementing Roadmap of Regulatory Reforms that would minimize risks of erosion of current trade benefits and upgraded competitiveness. 

10. Results- based outcomes with Institutional improvements and Oversight compliance. 

On a broader perspective way to achieve expected outcomes would be through having in place Budget Ombudsman as well as  citizens representatives for Ministries ( including Departments and Agencies) to ensure transparency and accountability. They may be given short-tern voluntary assignments to respond to public queries and complaints, coordinate on giving responses regarding actions undertaken on budget implementation related concerns.Institutional work plan should reflect efficient management of budgetary resources for implementation of projects under ministries concerned.Parliamentary Standing Committees offer suitable channels of feedback that would enable adequate monitoring of both locally-funded and development- partner aided projects. 

Concluding observations:

Over the years, Budget process is gradually shifting  from an annual revenue-expenditure exercise toward a broader domain that involves reassessing priorities, fiscal and monetary adjustments. public-private sector harmonization and stakeholder accountability. In addition, the budget should be catered to effectively mainstreaming citizens in the overall process of rural and urban development, protect national economic interests in external development partnership, reduce disparities and ensure improved quality of lives for all segments of the country's population. 

The writer is a Lead Economic Adviser and Consultant.