After years of high inflation, currency pressure, falling private investment, banking vulnerabilities, and slow growth, the economy is moving from stabilisation to recovery. Against the backdrop, the FY2026-27 budget seeks to stimulate economic growth while maintaining fiscal discipline and macroeconomic stability. The budget emphasises investment in human capital, technology, digitalisation, rural development and revenue mobilisation. It also reflects the government's intention to restore economic momentum and strengthen confidence among investors, businesses and development partners.
However, the budget's success depends not only on resource allocation but also on implementation efficiency and on structural reforms in banking, capital markets, taxation, and public administration.
NUMBERS: A review of budget allocations over the last three fiscal years shows that the national budget was Tk 7.97 trillion in FY 25, Tk 7.90 trillion in FY 26, and has increased to Tk 9.35 trillion in FY 27. The revenue target was set at Tk 5.41 trillion in FY25 and increased to Tk 5.64 trillion in FY26. For FY27, the revenue target has been raised to Tk 6.95 trillion.
Meanwhile, the budget deficit stood at Tk 2.56 trillion in FY25. It declined to Tk 2.26 trillion in FY26. In FY27, the budget deficit is projected at Tk 2.43 trillion. As a percentage of GDP, the budget deficit was 4.6 per cent, 3.6 per cent, and 3.6 per cent, respectively, over the last three fiscal years.
GDP growth targets were 6.75 per cent in FY25, 5.5 per cent in FY26, and 6.5 per cent in FY27. Inflation targets were 6.5 per cent, 8.0 per cent, and 6.5-7.0 per cent for these years, respectively.
Government borrowing from the banking sector amounted to Tk 1.37 trillion in FY25. It was Tk 1.04 trillion in FY26 and is projected at Tk 1.31 trillion in FY27. On the other hand, interest payments stood at Tk 1.135 trillion in FY25, Tk 1.22 trillion in FY26, and Tk 1.25 trillion in FY27.
The figures indicate that the FY27 budget is considerably more growth-oriented than the previous budget. The government has increased development expenditure, strengthened revenue mobilisation efforts and projected stronger economic growth while maintaining fiscal discipline. Additionally, the FY27 budget adopts a moderately expansionary fiscal policy.
The 17 per cent budget increase shows the government's aim to boost economic activity through higher public spending. Emphasising education, technology, local government, rural development, and social protection is expected to generate jobs, raise productivity, and strengthen domestic demand. However, the fiscal deficit remains about 3.6 per cent of GDP despite the substantial increase in expenditure. This shows a commitment to fiscal discipline and debt sustainability.
In an environment where many developing countries are experiencing fiscal stress, Bangladesh's ability to maintain a moderate deficit ratio is a positive signal for investors and development partners.
Successful budget implementation will depend on effective revenue mobilisation. This may seem ambitious but is necessary. The national budget proposes a significant revenue increase. Achieving this depends on broadening the tax base, digitising tax administration, improving tax compliance, reducing tax evasion, and formalising economic activities.
In addition, the introduction and expansion of Business Identification Numbers (BINs) and the greater integration of digital financial transactions into the tax framework may significantly boost revenue collection over the medium term. Nevertheless, revenue mobilisation remains one of the biggest challenges in implementing the budget.
Equal emphasis must also be placed on monetary policy and macroeconomic stability. In this context, the budget's GDP growth target of 6.5 per cent and inflation target of 6.5-7.0 per cent indicate expectations of improving macroeconomic conditions. The budget anticipates that inflation will gradually moderate. As a result, monetary conditions will increasingly support investment and growth.
Achieving these targets will require Bangladesh Bank to ensure effective inflation management, stable exchange rates, adequate liquidity, sustainable credit growth, and financial sector stability.
Strong coordination between fiscal and monetary authorities will therefore be essential.
BANK & CAPITAL MARKET: Then comes the banking sector, the primary source of financing for Bangladesh's economy. The budget is expected to boost demand for trade finance, SME financing, retail banking, digital financial services, and payment and settlement services. The incentives for digital transactions and formalisation of economic activities are particularly positive for the banking sector.
However, several challenges persist. In particular, the projected increase in government borrowing from banks remains a significant concern. Heavy reliance on bank financing may reduce liquidity, crowd out private-sector borrowing, raise funding costs, and slow credit growth for productive sectors.
This remains one of the most important risks within the budget frame. Therefore, accelerating banking sector reforms is imperative. A healthy banking system is essential for sustainable economic growth.
The capital market, however, has received limited attention. While Bangladesh still depends heavily on bank financing, by contrast, developed economies rely more on capital markets for long-term financing.
Despite this, the budget includes several positive measures, such as an increased tax-free income threshold, startup incentives, and support for digital entrepreneurship. Nevertheless, stronger initiatives are required to further develop the corporate bond markets, sukuk markets, infrastructure bonds, municipal bonds, pension funds, mutual funds, and the broader institutional investors.
The Bangladesh Securities and Exchange Commission (BSEC) should place equal emphasis on market development and investor protection.
A stronger capital market would reduce pressure on banks, mobilise long-term savings and support sustainable industrial growth.
ALLOCATIONS: Notably, an encouraging aspect of the budget is the increased allocation for education and technology, as investment in human capital remains the foundation of long-term productivity and economic competitiveness.
The substantial increase in spending on local government and rural development is likely to yield significant multiplier effects, including job creation, infrastructure development, higher agricultural productivity, and greater domestic consumption. Moreover, continued investment in healthcare also boosts workforce productivity, social welfare, and long-term economic resilience.
Persistent inflation has eroded purchasing power and increased the cost of living. If the government successfully reduces inflation to the targeted range, households and businesses are likely to benefit. They may see improved purchasing power, lower business costs, greater investment confidence, and enhanced economic activity.
Policymakers therefore prioritise controlling inflation. Another key concern is the rising interest burden and its impact on debt sustainability. Interest payments are expected to reach approximately Tk 1.27 trillion. This trend underscores the rising cost of public debt.
To maximise the benefits of the FY27 budget, policymakers should prioritise reforms in the banking sector, capital market, revenue administration, investment promotion, and public sector efficiency. To enable the banking sector to capitalise on the budget's opportunities, priority should be given to accelerating the recovery of non-performing loans (NPLs), strengthening governance, improving risk management, and promoting digital banking.
Similarly, the development of the capital market would benefit from measures such as developing the corporate bond and sukuk markets, encouraging quality IPOs, expanding the institutional investor base, and improving investor confidence.
At the same time, investment promotion efforts should emphasise improving the ease of doing business, simplifying regulations, strengthening investor protection, and encouraging foreign direct investment.
Public sector efficiency must also be enhanced through improved project implementation, reduced delays and cost overruns, and stronger monitoring and accountability mechanisms.
END NOTE: Overall, the budget sends a positive signal regarding Bangladesh's economic recovery prospects. Compared with the previous budget, it is larger, more growth-oriented and more development-focused. Its emphasis on education, technology, digitalisation, rural development, and revenue mobilisation reflects a forward-looking policy approach.
However, sustainable economic transformation cannot be achieved solely through budgetary allocations. The future success of Bangladesh's economy will depend on deeper structural reforms in banking, capital markets, governance, public administration and investment promotion. If these reforms are pursued alongside the effective implementation of the FY27 budget, Bangladesh can accelerate its journey toward becoming a more prosperous, resilient and developed economy.
The writer is a banking, capital market and financial analyst