The government is preparing a massive budget for the upcoming FY27, driven by the need to fulfill election promises, manage rising subsidy costs, and partially implement a new pay scale for public employees.
Sources within the Finance Ministry suggest that the budget could exceed Tk900,000 crore, marking one of the most significant expansions in recent history.
However, since revenue growth is failing to keep pace with this surge in spending, the budget deficit is expected to widen considerably.
Consequently, the government will likely need to secure substantial loans from both domestic and foreign sources in the coming fiscal year.
This outlook emerges from discussions with officials at the Finance Division and those involved in the budget formulation process.
For the first time in nearly two decades, a BNP-led government will present the national budget in Parliament.
Compared to the current FY26 budget of Tk790,000 crore, Finance and Planning Minister Amir Khosru Mahmud Chowdhury plans a significant hike to over Tk900,000 crore.
Preliminary framework discussions have already taken place within the Coordination Council on Finance, Currency, and Exchange Rates, focusing on GDP growth, inflation targets, the Annual Development Program (ADP), and the projected deficit limit.
A widening fiscal deficit
The revenue landscape remains a major concern. For the current fiscal year, the total revenue target was set at Tk564,000 crore, with Tk499,000 crore expected from the National Board of Revenue (NBR).
Despite a plan to increase next year’s target by nearly Tk100,000 crore—primarily through expanded VAT collection—expenditure pressures are expected to outrun these gains.
While the deficit for the current year was estimated at Tk226,000 crore (3.6% of GDP), officials anticipate that the gap could climb to 5% of GDP in the next fiscal year.
In absolute terms, this deficit could approach nearly Tk275,000 crore.
The urgency of the situation is underscored by the NBR’s performance in the first eight months of the current FY26 (July–February).
Against a target of Tk325,802 crore, the board managed to collect only Tk254,330 crore, resulting in a staggering shortfall of Tk71,472 crore.
Ministry officials warn that if this trend continues, the year-end deficit could exceed Tk100,000 crore.
This persistent gap highlights a fundamental challenge: while government spending is rising rapidly, revenue collection remains sluggish.
Analysts argue that without deep reforms in tax administration and a crackdown on tax evasion, meeting the ambitious targets required for the new budget will be nearly impossible.
To meet the revised annual target of Tk554,000 crore, the NBR would need to collect nearly Tk300,000 crore in just four months—a feat experts consider highly unrealistic.
To plug the massive budget hole, the government must lean heavily on borrowing.
For the upcoming year, the target for bank borrowing is expected to rise to Tk120,000 crore, up from the current year’s goal of Tk104,000 crore.
Total domestic and foreign borrowing targets for the current year were Tk125,000 crore and Tk101,000 crore, respectively.
On the international front, the government is seeking further assistance. A delegation led by the Finance Minister will attend the Spring Meetings of the World Bank and the IMF next week.
They aim to secure the approval for a $1.3 billion sixth installment of an ongoing IMF loan and may apply for an additional $2 billion to stabilize the economy.
The cost of election promises
The budget must accommodate several high-priority programs outlined in the government’s election manifesto.
These include the Family Card program, Farmer Cards, interest waivers on agricultural loans, canal re-excavation, and nationwide tree plantation drives.
The Social Welfare Ministry has informed the Finance Division that the Family Card program alone will require roughly Tk13,000 crores in its first year. Furthermore, the government intends to partially implement a new pay structure for public servants.
Although Tk22,000 crore was allocated in the current year’s revised budget but left unused, the Finance Division is now considering a Tk25,000 crore allocation for the next fiscal year to begin this transition.
A large portion of the budget is already consumed by non-discretionary spending.
Interest payments on existing debt were allocated Tk122,000 crore this year, a figure set to rise.
Additionally, the conflict in the Middle East has driven up global energy prices, increasing the subsidy burden for power and fuel.
Finance Minister Amir Khosru Mahmud Chowdhury has indicated that if global prices remain high, an additional Tk36,000 crore may be required for subsidies.
Prof Selim Raihan, executive director of Sanem, noted that the new government is inheriting significant economic pressure from the previous administration, now compounded by global uncertainties like the Middle East war.
He emphasized that while election pledges are vital, the government must prioritize spending ruthlessly and implement clear policies to stimulate the private sector and boost investment.