The Centre for Policy Dialogue (CPD) has raised concerns over the interim government’s proposed national budget for FY2025–26, labelling it ‘overly ambitious and structurally inconsistent’. The think tank has called for a mid-term review of the budget’s implementation to ensure greater transparency and realignment with current economic realities.
At the CPD Budget Dialogue 2025, held on Sunday, 22 June 2025, Dr Fahmida Khatun, Executive Director of CPD, presented CPD’s key observations on the proposed budget. ‘The macroeconomic framework is built on assumptions that are not aligned with prevailing economic trends,’ Dr Khatun remarked.
The event, part of CPD’s flagship programme ‘Independent Review of Bangladesh’s Development (IRBD)’, gathered key stakeholders to deliberate on the public finance issues presented in the context of Bangladesh’s ongoing political and economic challenges.
Dr Khatun highlighted concerns over the GDP growth target, set at 5.5 per cent for FY2026, even though provisional figures by the Bangladesh Bureau of Statistics estimate only 4.0 per cent growth in FY2025. She noted that inflation was projected to drop to 6.5 per cent, despite averaging over 10 per cent in May 2025.
‘Such projections underestimate both domestic constraints and external risks’, she asserted, emphasising that the government’s optimistic outlook on growth was far from realistic given the current economic situation.
The think tank also expressed doubts over the feasibility of the budget’s revenue targets. With the budget aiming for an 8.9 per cent growth in revenue collection, CPD estimated that an additional BDT 128,000 crore would need to be mobilised, which appears highly unlikely given the current scenario.
Furthermore, Dr Khatun pointed out that the proposed deficit financing plan, which depends heavily on bank borrowing (46 per cent), could exacerbate liquidity constraints in the already fragile banking sector.
CPD also observed discrepancies between the government’s policy rhetoric and actual resource allocation. While the government pledged to prioritise people’s welfare, real-term allocations for critical sectors such as health, education, and agriculture have either stagnated or declined.
‘Despite pledges to prioritise people’s welfare, allocations for these sectors have been reduced in real terms,” Dr Khatun said. Alarmingly, more than 68 per cent of incremental public expenditure was allocated to non-programmatic areas, such as equity injections, loans to autonomous bodies, and reserve funds.
The continued focus on infrastructure in the Annual Development Programme (ADP) further underscores the limitations of the budget. CPD noted that 45 ADP projects received token allocations, while over a third of all ongoing projects had seen multiple time extensions, some extending over a decade.
CPD also criticised the inflation-control measures outlined in the budget, deeming them insufficient in addressing the cost-of-living crisis. Though the tax-free income threshold has been modestly raised to BDT 3.75 lakh, CPD’s analysis revealed that low- and middle-income groups will still bear a disproportionate tax burden.
While the budget proposes a shift towards increased revenue mobilisation, including withdrawing VAT exemptions and expanding tax coverage, CPD raised concerns about the expansion of tax officials’ powers. ‘The delegation of search and inspection powers to junior tax officials may lead to possible misuse and a lack of oversight,’ Dr Khatun warned.
However, the budget did receive some praise, particularly for its focus on youth and employment generation. The Ministry of Youth and Sports received a 53.2 per cent increase in funding, and the Ministry of Labour and Employment saw a 26.6 per cent rise in its budget. Despite these increases, CPD cautioned that many of the employment-related projects remain unapproved, with insufficient funding for skills development.
On the negative side, CPD found allocations for climate change and gender equality initiatives to be woefully inadequate. Budgetary allocations for climate-related projects fell by 2.4 per cent, and gender-relevant budgeting, both as a share of total expenditure and as a percentage of GDP, also declined.
Prominent political figures, key experts, and industry leaders weighed in on the budget during the event.
Barrister Rumeen Farhana, Assistant International Affairs Secretary of the BNP, emphasised the need for an inclusive budget that prioritises welfare for workers, marginalised groups, and students. ‘An inclusive and truly welfare-oriented budget is needed for Bangladesh’s development,’ she stated.
Dr Hossain Zillur Rahman, Executive Chairman of the Power and Participation Research Centre (PPRC), echoed similar concerns, noting that careful attention must be given to the allocation for education, health, and social security, as these sectors reflect the government’s commitment to social welfare.
Mr Syed Abu Naser Bukhtear Ahmed, Chairman of Agrani Bank, called for banking reforms to stabilise the financial sector, which he described as a critical factor in sustaining economic growth.
Meanwhile, Mr Showkat Aziz Russell, President of the Bangladesh Textile Mills Association (BTMA), warned that inadequate allocation for the garment sector could hinder the growth of one of the country’s most important industries.
Mr Inamul Haq Khan, Senior Vice President, Bangladesh Garment Manufacturers and Exporters Association (BGMEA) remarked ‘A strong emphasis on export-oriented industries is necessary for economic growth, and the budget should focus on providing incentives to boost these sectors’.
‘A reactive approach to economic crises will not suffice. The government must adopt proactive policies that will stabilise key sectors like banking and energy, which are critical to long-term prosperity’ recommended the chairman of Policy Exchange of Bangladesh, Dr M. Masrur Reaz.
Mr Razequzzaman Ratan, President, Socialist Labour Front highlighted ‘Workers have been severely impacted by the current economic policies, and the budget fails to adequately address the growing disparities in the workforce’.
‘We need to shift the tax burden from indirect taxes that disproportionately affect the general public, to a more progressive system that focuses on direct taxes from wealthier groups’, suggested the Economic Reporters Forum (ERF)’s President, Ms Doulot Akter Mala.
The event concluded with an open-floor discussion, where policymakers, diplomats, business leaders, and civil society representatives provided their insights on the proposed budget and its implications for Bangladesh’s future.
