FY26 budget: From past imperfect towards future indefinite

A man on the Dhaka metro receives a phone call. From his end of the conversation, it can be assumed the caller, perhaps jokingly, asked how it felt to use the metro after toppling the government that built it. The man loses his temper and retorts, "It was not the government's money. We paid for it. It's our money." His voice cuts through the quiet hum of the compartment.

Beneath the metro, however, a familiar chaos continues. The roads remain gridlocked with decrepit, smoke-belching buses and swarms of rickshaws pouring onto main roads from alleyways. Traffic rules are routinely ignored. The metro is not a systemic upgrade—it is an escape from the dysfunction below.

This lopsided development has characterised Bangladesh over the past fifteen years: initiate mega projects funded by taxpayers—both directly and indirectly—while syphoning off massive amounts of money through corruption.

Viewed through this lens, the 2025–26 budget is a cautious but deliberate effort to salvage the economy and ensure a baseline standard of economic continuity. It is far from ambitious, and remains overshadowed by profound uncertainty.

Yet critics were quick to pounce. For the first time in Bangladesh's history, the proposed budget—at Tk7,90,000 crore—is Tk7,000 crore smaller than the preceding year's. "What a shame!" they exclaim, ignoring the economic wreckage the former government left behind before fleeing in the face of mass resistance in July last year.

The previous regime had unbroken political control from 2009 to 2024. It muzzled the opposition, controlled law enforcement, and rolled out highways, flyovers, bridges, tunnels, power plants, and more—with ceaseless promises of 100 economic zones.

The results, however, were devastating. According to the 2024–25 Economic White Paper, roughly $234 billion—about $16 billion annually—was lost through money laundering and illicit capital flight between 2009 and 2023.

Project costs were deliberately inflated. Of 29 major projects (totalling $87 billion), in-depth analysis of seven revealed cost overruns amounting to $11.5 billion (Tk81,000 crore)—a staggering leap from Tk114,000 to Tk195,000 crore.

Corruption was endemic. Between $14–24 billion (Tk1.61–2.8 lakh crore) vanished through inflated contracts, bribes, and nepotistic procurement practices. Infrastructure development became a front for crony capitalism.

Banks were hollowed out. Politically connected borrowers exploited the system, turning banks into tools of oligarchic looting.

Key economic indicators were routinely doctored. GDP and inflation figures were manipulated, with inflation stats reportedly adjusted and approved by the Prime Minister's Office.

The long-term damage is structural. The country now teeters on the brink of the middle-income trap. Capital-intensive mega-projects were prioritised over SMEs, agriculture, and urban services—eroding liveability and limiting future growth.

Welfare programmes were misdirected: 73% of social assistance went to those not in poverty. Corruption weakened climate resilience. Twenty million workers are highly vulnerable to poverty from even short-term income disruptions.

By June 2024, ten banks—including eight private Islamic banks and two state-owned ones—were "technically bankrupt", with distressed assets totalling Tk675,000 crore (approximately $78 billion).

Given this economic wasteland, what sort of budget could we possibly expect?

Finance Adviser Salehuddin Ahmed delivered the budget speech in a sombre room, seated alone at a long table—a striking contrast to the lively, applauding parliaments of previous years. His tone was grounded. He admitted this budget would not prioritise growth and development, but instead aim to stabilise and rebuild from the ruins left by the last regime.

The proposed layout is Tk7,90,000 crore—Tk7,000 crore less than FY25. Development expenditure has been slashed by Tk35,844 crore, from Tk2,81,453 crore. The budget deficit is now projected at 3.6%—a full percentage point lower than the previous year. The clear goal is restraint: cutting extravagance, scaling down mega projects, and minimising luxury imports.

The focus is not on growth, but on fixing the engine before attempting another journey. The rationale is sound. The arithmetic is cautious but realistic.

However, the ground realities are far more difficult.

The revenue target of Tk5,64,000 crore appears overly ambitious given current collection trends. The government plans to borrow Tk2,26,000 crore, adding further strain to a population already struggling with stubbornly high inflation. Although inflation has slowed, it remains near double digits. Contractionary monetary policy and import restrictions have helped cool price levels, but also contributed to a slowdown in economic activity—a painful trade-off.

The budget offers little by way of concrete measures to tame inflation.

Worse, political uncertainty is stifling investment. The interim government, formed following the July Movement and backed by a popular mandate, has introduced reform measures to revive institutions debilitated under the previous regime. But resistance from entrenched political interests has led to hesitation. Investors remain wary, awaiting a more stable climate. Without investment, job creation will remain stalled—bad news for a country with a rapidly expanding working-age population.

External threats loom even larger. The escalating Middle East conflict between Israel and Iran risks drawing in global superpowers. Rising oil and energy prices, combined with supply chain disruptions, will reverberate through every sector of the economy.

In short, the FY26 budget is born out of chaos—and destined to navigate uncharted waters. Its success depends not just on fiscal discipline, but on the restoration of trust, stability, and long-overdue institutional reform.