Originally posted in The Daily Star on 2 June 2026
The finance minister is set to present his government’s first national budget on June 11. Expectations are high—and for several reasons. The budget comes at a time when Bangladesh is going through one of the most difficult economic situations in decades. Growth has slowed considerably, inflation remains stubbornly high, investment has weakened, poverty has increased, persistent energy shortages and high energy costs continue to constrain production and competitiveness, and the banking sector remains under significant stress. At the same time, the country is set to graduate from the LDC category, which brings both opportunities and challenges. In this context, the FY2026-27 budget cannot be treated as a routine annual fiscal exercise. It must serve as a roadmap to restore macroeconomic stability, protect vulnerable citizens, rebuild investor confidence, and prepare the country for a more competitive post-LDC future.
The last few years have seen low GDP growth. In FY2024-25, the growth rate was 3.49 percent, while the government expects a five percent growth in FY2025-26. Inflation, on the other hand, rose to 9.04 percent in April from 8.71 percent in March this year. The April spike was driven by non-food inflation, possibly reflecting geopolitical tensions intensifying in the Middle East. Employment generation is also weak due to low investment. Between March 2025 and March 2026, credit to the private sector grew at 4.7 percent only. This means while economic activities are weak, prices are high. And when domestic vulnerabilities persist, external risks are felt more.
In this context, the government plans to present a large, expansionary budget proposal for FY2027. Reports suggest that the budget size may exceed Tk 9.30 lakh crore, with a revenue target of around Tk 6.95 lakh crore and a GDP growth target of 6.5 percent. This ambition is in line with the BNP government’s election manifesto, which spelt out several milestones to be achieved in the coming years. While the economy must grow faster to generate employment and income, several preconditions must be fulfilled to achieve high growth in the coming year.
First, higher growth will depend on the pace of investment recovery. Private investment has remained weak due to high borrowing costs, energy shortages, policy uncertainty, weak governance, delayed payments, and stress in the banking sector. Private investment accounted for only about 22 percent of GDP in FY2025. This level of investment is insufficient to generate the employment opportunities required to meet the needs of the country’s growing labour force. The budget should therefore prioritise measures that directly reduce the cost and uncertainty of doing business. These include reliable gas and electricity supplies for industry, faster customs clearance, timely VAT and duty refunds, improved port logistics, simpler business regulations, and targeted support for export diversification and SMEs. Export diversification beyond RMG products must be supported. Sectors such as pharmaceuticals, information technology, agro-processing, leather goods, and light engineering have the potential for future growth.
Second, structural weaknesses in the energy sector must be addressed. Energy shortages and high prices are currently affecting industrial production, agricultural activities, exports, private investment, and household welfare. Investments should focus on improving transmission and distribution networks, reducing system losses and enhancing the efficiency and financial sustainability of power utilities. Higher investment is needed to facilitate the growth of renewable energy, particularly rooftop solar, as well as domestic gas exploration and energy efficiency measures. Shifting the focus from installed capacity to a reliable and affordable energy supply will help reduce inflation, attract investment, and support higher economic growth.
Third, the quality of public spending must be improved. A large Annual Development Programme (ADP) will not automatically raise growth. Projects should be selected based on completion readiness, employment impact, import-saving potential, and contribution to productivity. Slow-moving and low-priority projects should be postponed. The budget should also allocate more to agriculture, irrigation, storage, transport logistics, health, education, skills, and climate resilience. These areas can directly support productivity and household welfare. A higher allocation to social infrastructure, such as health and education, is urgently needed. Of course, higher allocation does not automatically improve the quality of infrastructure investment, whether physical or social. Spending must be carried out with transparency and accountability.
Hopefully, the government will give adequate attention to other urgent issues while preparing an expansionary budget. To control inflation, it must prioritise supply-enhancing spending. This means more spending on food production, storage, transport, fertilisers, irrigation, energy supply and logistics, and less spending on non-essential construction, administrative expansion, and low-return projects. Import duties and taxes on essential food items, fuel, fertiliser, and medicine should be reviewed to ensure that budget measures don’t raise prices further. Market monitoring should also be strengthened to prevent hoarding, cartel behaviour, and artificial price increases.
For ordinary citizens, purchasing power remains the central concern. People will not benefit from higher GDP growth if their real incomes continue to fall. The budget should combine inflation control with income protection. The proposed Family Card can help poor families if it is properly targeted and fiscally sustainable. These programmes should be implemented through a clean beneficiary database, digital payments, and strict monitoring, so that support reaches poor and low-income families, marginal farmers, and informal workers.
Purchasing power can also be increased through employment and wage support. The budget should expand labour-intensive public works in rural and climate-vulnerable areas, support SMEs, promote women’s employment, and invest in skills training for young people. Minimum wages in low-paid sectors should be reviewed where appropriate, and social protection benefits should be adjusted in line with inflation. The budget should support technical and vocational education, skills development, entrepreneurship programmes, and digital employment opportunities. Investments that create jobs should receive greater priority over those that merely expand physical infrastructure.
The budget must also avoid excessive borrowing from banks. If the government borrows heavily from banks, private investors will face tighter credit conditions and higher interest costs, which will weaken investment and job creation. The government should rely more on concessional external financing for high-return projects, improve revenue collection, reduce wasteful expenditure, and manage subsidies more transparently.
The upcoming budget must also address the worrying rise in poverty. Recent estimates indicate that poverty has risen relative to pre-pandemic levels as prolonged inflation, weak employment growth, and economic uncertainty have eroded household incomes. Many families continue to struggle with the costs of food, healthcare, and education.
The FY2027 budget is the new government’s first major economic policy statement. It offers an opportunity to demonstrate a commitment to economic stability and social inclusion. As always, the budget’s success will not be measured by its size or the number of projects announced. It will be judged on whether it can reduce inflation, strengthen revenue mobilisation, make judicious public investment, revive investment, generate employment, and prepare Bangladesh for a more competitive and challenging future.
Dr Fahmida Khatun is an economist and executive director at the Centre for Policy Dialogue (CPD). Views expressed in this article are the author’s own.
