FY27 budget gets healthcare right, now comes the hard part

A national budget is not simply a statement of revenues and expenditures or an allocation of resources across sectors; it reflects the government's long-term vision, development strategy and policy priorities. In essence, a budget is a key policy document that outlines a government's programmes and priorities for governing the state.

The proposed 2026-27 Budget clearly reflects the government's long-term economic vision. It sets an ambitious goal of transforming Bangladesh into a $1 trillion economy by 2034. To achieve this objective, the government has emphasised leveraging the country's demographic dividend and longevity dividend to secure a democratic dividend.

A demographic dividend refers to the economic opportunity that arises when the working-age population grows faster than the dependent population. A longevity dividend refers to the economic and social benefits generated when people live longer, healthier and more productive lives. A democratic dividend refers to the additional development opportunities created through democratic governance, good governance and political stability.

Health is fundamentally linked to both the demographic and longevity dividends. Without a healthy population, neither can be translated into meaningful economic gains. Consequently, healthcare has emerged as one of the priority sectors in this year's budget.

The allocation for health accounts for approximately 7.4% of the total budget, significantly higher than the 4-5% range observed in recent years. Health expenditure, which represented around 0.58% of GDP in the previous fiscal year, is projected to rise to approximately 1.02% of GDP. This increase reflects the government's long-term strategy of gradually increasing health expenditure towards a target of 5% of GDP.

The government has also indicated a shift towards preventive healthcare rather than focusing primarily on treatment. However, this is a challenging objective, even for developed countries. Effective disease prevention requires strong control of non-communicable diseases, greater health awareness and a robust primary healthcare system. 

Bangladesh still lacks many of the institutional and infrastructural capacities needed for a fully prevention-oriented healthcare system. As a result, although initiatives may begin now, tangible benefits will take time to materialise.

One positive measure is the reduction or withdrawal of import duties on raw materials and medical supplies used in the treatment of cancer and kidney diseases. Particularly noteworthy is the complete withdrawal of the 15% value added tax (VAT) and the 5% advance tax on dialysis filters. This humane initiative is expected to reduce treatment costs and ease the financial burden on kidney patients.

The government's plan to transform Upazila Health Complexes into fully functional secondary healthcare facilities is also commendable. However, achieving this objective will require adequate manpower, specialist physicians, modern medical technology, infrastructure and sustained investment.

The proposed introduction of a Health Card under an integrated patient management and referral system is another positive step. It is expected to simplify healthcare delivery, improve patient management, and save both time and costs in the long term.

The initiative to strategically purchase healthcare services from reputed private hospitals through Public-Private Partnerships (PPPs) is relatively new in Bangladesh. Its effectiveness and impact on the accessibility, quality and affordability of healthcare services for the general population will require careful evaluation.

The budget also includes measures to modernise medical education curricula, provide student loans for higher studies at home and abroad, improve hostel facilities, and introduce mandatory rural residential training. These initiatives are expected to improve the quality of medical education.

The proposal to recruit 5,000 doctors immediately is encouraging. However, increasing workforce numbers alone will not be sufficient. Appropriate training, infrastructure, modern technology and a supportive working environment will be equally important. Successful implementation will require comprehensive planning, efficient management and collaboration among all stakeholders.

The establishment of internationally recognised nursing institutes, the strengthening of existing nursing education systems, and the introduction of Master's programmes in 25 government nursing colleges are highly positive initiatives. These measures are expected to enhance the quality of nursing services and contribute significantly to a more effective and compassionate healthcare system.

In Bangladesh, approximately 73%-74% of total health expenditure is paid directly out of pocket by individuals, and 50%-64% of that expenditure is spent on medicines. Therefore, one of the public's principal concerns in every budget is how budgetary measures will affect medicine prices and affordability.

This year's budget provides duty concessions on raw materials used in the production of nine medicines for the treatment of cancer and kidney diseases. It also grants concessions on 17 carefully selected raw materials and excipients used in medicines for a few other diseases. These measures are expected to reduce production costs and make the corresponding medicines more affordable. 

However, the market share of these duty-concession items remains relatively small compared with the overall pharmaceutical market. Therefore, while some specific medicines may become cheaper, it is unrealistic to expect a substantial reduction in overall medicine prices.

The budget places special emphasis on the domestic production of pharmaceutical raw materials. Duty concessions have been granted on 51 items used in the production of Active Pharmaceutical Ingredients (APIs). This is expected to encourage investment in the local raw material industry, reduce dependence on imports and lower production costs over the long term.

The government has also introduced measures to promote pharmaceutical exports, including tariff incentives, internationally recognised testing and certification laboratories, online licensing systems, and the establishment of a Medical Technology Park. These initiatives are expected to improve the competitiveness of the pharmaceutical industry and increase export earnings.

In addition, the budget encourages local manufacturing of medical equipment and devices through duty concessions on imported raw materials and components. This is expected to accelerate the growth of the domestic medical device industry, reduce import dependence and contribute to long-term healthcare cost savings.

Overall, the 2026-27 Budget places significant emphasis on healthcare, the pharmaceutical industry and medical equipment manufacturing, aligning well with the country's long-term economic and human development goals. 

However, the successful implementation of many of these initiatives will require overcoming challenges related to manpower shortages, infrastructure constraints, management capacity and good governance. Ultimately, the success of the budget will depend less on the size of its allocations than on their effective and transparent implementation.

Sketch: TBS

Dr Md Abu Zafor Sadek, Deputy General Manager at UniMed UniHealth Pharmaceuticals and Former Consultant, World Bank, Dhaka.

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.