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Published : 02 Jun 2025, 03:14 AM
Bangladesh’s interim administration is set to present its first national budget on Monday, with Finance Advisor Salehuddin Ahmed introducing what he calls a “realistic” and “simple” fiscal plan amid widespread expectations for reforms following the fall of the Awami League government in the July Uprising.
Crafted against a backdrop of political transition and economic uncertainty, the proposed FY2025–26 budget marks a shift in tone rather than substance.
It will be smaller in size, more restrained in ambition, and aimed at stabilising public finances instead of delivering sweeping structural changes.
For the first time in post-independence history, the size of the national budget is expected to be lower than that of the outgoing fiscal year’s original allocation—pegged at around Tk 7.9 trillion, or 12.65 percent of GDP.
This is 0.88 percent lower than the original FY2024-25 budget, representing a cut of approximately Tk 70 billion.
However, compared with the revised budget of the outgoing fiscal year, which was scaled back to Tk 7.4 trillion by the interim administration, the new proposal reflects a 6.18 percent increase.
Spending will also be pared back, with the budget deficit target reduced to Tk 2.26 trillion, or 3.62 percent of GDP--down from 4.6 percent in the outgoing fiscal year.
If implemented, this would be Bangladesh’s lowest budget deficit since FY2011-12. In contrast, deficits have consistently remained above 4.9 percent since FY2013-14.
In a pre-budget interview with bdnews24.com, Salehuddin said the aim was to keep the fiscal plan “as rational and simple as possible” while remaining grounded in current realities.
“This isn’t a budget meant to usher in radical changes overnight,” he said. “Reforms must be phased in. We've tried to maintain logic and realism throughout.”
Former Bangladesh Bank governor Salehuddin, who held the post nearly one and a decades ago, has said the decision to keep the budget size modest and reduce the deficit aligns with economic realities.
He stressed that the budget is not intended to dazzle, but to stabilise.
With no elected government in office, the interim administration has deliberately avoided dramatic fiscal manoeuvres or populist promises.
But his targets, raising GDP growth to 5.5 percent and bringing inflation down to 7 percent, are being viewed as ambitious.
A BUDGET WITHOUT BREAKTHROUGHS
The budget announcement, scheduled for 3pm Monday via televised address, in the absence of a functioning parliament, comes at a time of mounting pressure for reform.
But economists see the proposal as a continuation of the status quo, rather than a transformative shift.
“This is essentially a repeat of the old framework,” said Selim Raihan, executive director at the South Asian Network on Economic Modelling (SANEM), speaking to bdnews24.com on Thursday.
“Despite being in power for nearly nine months now, the interim government appears to be presenting a budget that does not break from the traditional structure.”
He criticised the continued use of outdated and contested data as the foundation for the budget. “We challenged several figures, GDP, national accounts, investment data—in the White Paper Committee. Some of it was manipulated or flawed. But nothing has changed. The new budget is still based on those discredited numbers.”
Salehuddin acknowledged the structural constraints. With only a limited mandate and timeline, the interim government has opted not to launch any new “mega projects”.
Large-scale undertakings of $8-10 billion, common under the previous administration, are being reined in. Current projects like the metro rail will continue, but new ones will be limited to the $2-3 billion range.
The budget is expected to maintain key social protection schemes, including allowances for the elderly, widows, the destitute, and people with disabilities, with modest increases in coverage and benefit amounts.
A separate allocation will be made for the rehabilitation of those affected by or involved in the July Uprising, although the government is still working on a long-term strategy for their reintegration.
Fuel prices will remain unchanged, but subsidy cuts are being explored in high-expenditure sectors such as energy and electricity.
Agricultural subsidies will remain intact, particularly for fertilisers, pesticides, and irrigation diesel.
Health and education allocations may be slightly reduced, but only through tighter oversight.
Salehuddin cited examples of inflated project estimates, sometimes by Tk 5–6 billion, under previous budgets, often designed to benefit contractors.
These figures are now undergoing a second round of review.
Not all economists are convinced, though.
Debapriya Bhattacharya, distinguished fellow at the economic think tank, the Centre for Policy Dialogue (CPD), warned that the new budget offers “old wine in a new bottle".
Speaking at a public event in Dhaka on Saturday, he lamented the absence of meaningful new initiatives.
“Regrettably, this budget too is likely to be conventional. Without bold steps on loan recovery, repatriation of laundered money, or broadening the tax base, there is little to suggest any real breakthrough,” he said.
Economist Mustafa K Mujeri also expressed disappointment, arguing that the country had an opportunity to clear out the “debris of past policy failures” and deliver a smart, forward-looking budget.
Yet Salehuddin insists that caution is warranted under current circumstances. With elections pending, an uncertain investment climate, and limited fiscal room, the interim government has chosen prudence over populism.
“The aim is not to please everyone,” he said. “We’ve focused on sectors that have long been neglected. It’s a business-friendly budget, but not everyone will benefit equally.”
HOW HIGH ARE THE EXPECTATIONS?
The last time a budget was presented outside of parliament was in 2008. The military-backed caretaker government was in power back then.
On Jun 9 of that year, the then finance advisor AB Mirza Azizul Islam presented a Tk 999.62 billion budget for FY 2008-09.
It was also a Monday. At 3pm, Mirza Aziz’s budget speech was broadcast on Bangladesh Television and Bangladesh Betar.
The finance advisor will announce the budget on television and radio this time as well. Following that, the president will approve it by signing the budget ordinance on Jun 30.
However, several parts of the budget, especially measures involving tax and customs duties, will take effect from Jun 2. Other allocations will be effective from Jul 1, Salehuddin said in the interview with bdnews24.com.
The new fiscal year is arriving amid a series of state reforms following the tumultuous civil movement spearheaded by students that concluded ousted premier Sheikh Hasina’s decade-and-a-half-long rule.
As always, even though the finance advisor has to work hard to make a budget amid resource constraints, expectations from him are endless.
Amidst the concerns about black money, defaulted loans, recovery of laundered money and recovering the battered financial sector, there’s been a flurry of demands from all around directed at the interim government for several months.
In pre-budget discussions, every group has asked for something better for themselves.
Comparing the social and political contexts of his time and the current budget, Mirza Aziz said that during the previous caretaker government, there was “a sense of relief” among people as there was no political “discord” between political parties. But currently, various parties are making “conflicting” demands, which has made the budget preparation much more challenging.
Mohammad Hatem, a leader in the ready-made garment sector, said the economy has somewhat revived due to multiple initiatives after the interim government took charge. But in most cases, Bangladesh’s industrial sector can still be said to be “in the ICU”.
He highlighted the need for several incentives to get out of the fading situation.
In this climate of reform, Salehuddin is receiving all sorts of demands while preparing a moderate budget.
From the outset, the finance advisor has been facing pressure to tackle the inflation challenge amid political and investment uncertainty.
Although the caretaker government tried to move forward with reforms, it had to backtrack in some areas such as the abolition of the National Board of Revenue (NBR) and the amendment to the Public Service Act following resistance from government employees.
Above all, senior economist Zahid Hussain sees growing political uncertainty surrounding the upcoming general election as the biggest concern.
According to him, the crisis is eroding investor confidence in Bangladesh, leaving the country without a viable investment environment.
In such an environment, he said, investors are more inclined to "keep money in their pockets" than commit to new ventures.
The former lead economist at the World Bank's Dhaka office said, “Until the political fog clears, investment will remain stalled. Once there's clarity, investors will say ‘the cloud has lifted’.”
Following the path of reforms, the interim government will be able to break free from the old, crumbling system and this uncertainty will also be resolved, he hopes.
Economist Selim Raihan also emphasises the need for not only resolving ongoing political volatility but also adopting investment-friendly decisions in the upcoming budget.
He believes the budget should contain clear guidelines to address these issues and recommends adjusting interest rates and tax policies to boost investment.
He stressed that sustainable control of inflation is crucial for poverty reduction and recommended changes in the social protection sector as well.
Despite the pressure, the Dhaka University economics professor believes the interim government’s budget should focus on health, education and social protection sectors.
Economist Mustafa K Mujeri shared his own expectations about the upcoming budget.
The former director general of the Bangladesh Institute of Development Studies (BIDS) said, “Since this is not a political government, one of its goals should be to make this budget an ideal one.
“The upcoming budget from the current government should be the best of all time, particularly so that poor and low-income people can benefit.”
He believes that an “ideal” budget will help all future political governments “move much further ahead.”
In his view, inflation cannot be controlled by monetary policy alone; it requires a healthy business environment and product-based market management.
The former chief economist of Bangladesh Bank noted that the economy must be made active to create employment and for that, the political environment is a key factor.
He emphasised that a large portion of both development and non-development expenditures in the budget are lost to corruption and waste. A non-political government can impose control on this, reducing non-development expenditures and stopping corruption in projects.
The interim government is struggling as foreign investment has declined significantly and domestic factory expansions are also stalled.
In this situation, Zahid Hussain emphasised the need for a “policy trade-off” especially highlighting that businesspeople pay attention to tax policies.
Bangladesh’s economy continues to struggle under prolonged inflation, exacerbated since the post-pandemic recovery. For nearly three years, poor and low-income populations have borne the brunt of the crisis.
The interim government has raised policy interest rates several times to tame inflation, which has suppressed liquidity and further weakened private-sector investment. Private credit growth has now fallen to around 7 percent.
In such circumstances, just before presenting the first budget since assuming power after the July Uprising, Mirza Aziz emphasised that revenue collection, expenditure levels and budget deficit financing—whether through domestic or foreign borrowing—must be carefully considered, taking the overall situation into account.
At the same time, he advised paying special attention to the current macroeconomic problems, particularly the decline in the GDP growth rate.
He fears that poverty alleviation programmes might face setbacks in this situation.
BUSINESS-FRIENDLY BUDGET – WHAT ELSE DID SALEHUDDIN SAY?
Finance Advisor Salehuddin faces hurdles and no shortage of worries, broadly, there are numerous challenges ahead of him.
With a constrained budget, he aims to create equal opportunities for everyone and improve people’s standard of living.
Speaking to bdnews24.com on Thursday afternoon, he discussed multiple aspects of the budget, stressing that steps would be taken to reduce disparities between those who obtained more benefits during the previous government’s tenure and those who received less.
He also hinted at initiatives to cut unnecessary expenses while reducing the corporate tax rate and rationalising tax exemptions to boost domestic resource mobilisation.
Salehuddin said while they would try their best to keep the deficit capped at 4 percent, there would also be reliance on foreign aid to cover it.
The upcoming budget will also aim to provide relief to low-income people, he said.
“For consumers and common people—especially those with limited income—the budget will offer some relief. We’ve been trying for a long time to ensure that the burden of direct and indirect taxes remains bearable. That objective has also guided this budget.”
The advisor said that efforts were being made to simplify the VAT structure.
Outlining some further steps, he said: “Tax exemptions are being gradually withdrawn. Only the essential and justified exemptions will remain.
“The entire budget planning is based on practical considerations, business-friendliness and simplifying the tax system.”
When asked whether the tax-free income threshold would rise, he gave a positive answer, saying it would be raised somewhat compared with last time.
The NBR said the current tax-free income threshold of Tk 350,000 will be proposed to be raised to Tk 375,000.
WHAT’S IN THE BUDGET PROPOSAL?
[Writing in English by Akramul Momen]
