Originally posted in The Financial Express on 22 March 2025
Public investment stymied with budget spending at historical low
Investment, employment, economic growth deemed at risk
An exigent austerity following regime change keeps Bangladesh’s public investment stymied as both the operating-and development-budget expenditures hit a ‘historical low’ during the first half of this fiscal, officials said.
They fear the lower trend in public expenditure may downgrade investment, employment and economic growth as Bangladesh’s government investment is rated lowest in Asia.
Economists predict if the sluggish public expenditure is driven by the result of low revenue growth, and if the necessary infrastructure development does not taken place, the lackluster investment scenario and employment generation would linger.
Government agencies spent only 36.7 per cent of the country’s current operating budget while only 14.47 per cent of the development budget during July-December (H1) period of the current fiscal year (FY) 2024-25, Ministry of Finance (MoF) data showed.
According to the official data, ministries and agencies spent only Tk 1.86 trillion or 36.7 per cent of total Tk 5.07-trillion allocations during the H1 period of the current fiscal.
During the first of the financial year, the development-budget-spending situation was uninspiring as they could spend only Tk 407.28 billion out of the Tk 2.81-trillion development budget, the official data showed.
Up to December 2025, actual expenditure was 14.47 per cent of the development budget. The actual outturn for the same period of the last FY2024 was some 16.74 per cent of the revised budget.
Spending in agriculture has been the highest–56.1 per cent of allocated budget–followed by interest- payment head at 55.1 per cent, education 37.5 per cent, public order and safety 35.3 per cent, defence 32.4 per cent, IES 31.1 per cent and recreation, culture and religion affairs 30.8 per cent.
Sectors like housing, general public services and local government and rural development etc have shown relatively lower expenditures under operating-expense category.
In terms of economic classification of the operating expenditure, major categories were subsidies and cash transfers (41 per cent), domestic interest payments (29 per cent), and pay and allowances (17 per cent) during the July-December period.
Research Director of the Centre for Policy Dialogue (CPD) Dr KG Moazzem says the real economic scenario after the inflated propaganda on the national economy by the previous government is really different.
“It is welcome that the interim government is discouraging the less-important projects. So, the development expenditure is showing a lower trajectory. On the other hand, the government is also overseeing the operational expenditure strictly from the revenue budget which also affected the expenditure,” he told the FE.
The economist notes that government’s cautious approach would ultimately bring good result if the unnecessary and inflated expenditures are controlled.
Nevertheless, says the CPD researcher, if the public expenditure is affected for the lower revenue income, then it would have a bad impact on the economy.
The government has revised its GDP-growth target for the current FY2025 to 5.25 per cent from an initial estimate of 6.75 per cent, citing political instability and its impact on investor confidence.
Another economist, Dr Masrur Reaz, says the sluggish public expenditure will definitely have a negative impact on investment, employment and economic development of the country.
Both the public and private investments have been slower, which would ultimately slow down Bangladesh’s economic growth significantly this year, he observes.
“However, we hope Bangladesh government would start to extend its public investment for enhancing the private investment as well as the economic growth,” the economist suggests.
In H1 this FY2025, total revenue collection increased by 4.4 per cent compared to the corresponding period of the previous FY2024 and achievement against annual target is 36.1 per cent.
The government earned Tk 1.95 trillion as revenue during the H1 of this fiscal against the total mobilisation target of Tk 5.41 trillion, the MoF data showed.
The government has taken a Tk 7.97 trillion worth of national budget for the FY2025 where a Tk 135.70- billion outlay is earmarked for some schemes and non-ADP special projects while the reaming Tk 5.07 trillion for operating expenditure and Tk 2.81 trillion for development spending.