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Published : 03 Jun 2025, 03:54 AM
Even as the interim government vows to rein in spending by cutting development funds, its proposed budget for FY2025–26 includes fresh allocations for civil servants under “special benefits”, a move economists are calling “questionable” in the face of growing fiscal pressure.
The proposed budget outlines a deficit of Tk 2.26 trillion, which equals 3.62 percent of gross domestic product (GDP).
Finance Advisor Salehuddin Ahmed unveiled the Tk 7.90 trillion budget at 3pm on Monday—Tk 70 billion less than last year’s original plan.
Still, the proposal marks a 6.18 percent increase from the revised budget of Tk 7.44 trillion and represents 12.65 percent of GDP.
By contrast, the outgoing fiscal year’s revised budget was equivalent to 14.24 percent of GDP and reflected an 11.56 percent jump over the previous year’s allocation, set under former finance minister Abul Hassan Mahmood Ali.
DEVELOPMENT SPENDING SLASHED
Development expenditure for FY2025 was originally set at Tk 2.81 trillion.
The proposed budget cuts this by Tk 358.44 billion, bringing the allocation down to Tk 2.46 trillion.
The largest portion of this cut hits the Annual Development Programme (ADP).
Compared with the original ADP size for the current fiscal year, the proposed ADP has been slashed by Tk 350 billion, and is down by Tk 140 billion from the revised estimate.
The outgoing year’s ADP was initially Tk 2.65 trillion, revised down to Tk 2.16 trillion.
The proposed figure for next year stands at Tk 2.30 trillion.
NO NEW MEGAPROJECTS
The Awami League administration had undertaken several megaprojects over its tenure. While a few have been completed, others remain ongoing.
Citing this, former World Bank chief economist Zahid Hussain described the current development plan as “routine”.
“Some ADP projects will simply not get funded --nor is there scope for it,” he told bdnews24.com.
“Several will have to be dropped due to lack of importance. The scale of cuts isn’t all that meaningful.”
Echoing this, Dhaka University economy professor Muhammad Saifuddin Khan said the government appears to have managed to reduce pressure from older megaprojects, resulting in trimmed development costs.
“Expenditure on megaprojects has already fallen,” he added. “In many cases, the government may not finance them at all now--which explains the lower allocation for development.”
JOB CREATION AT RISK
Lower development expenditure often leads to slower economic activity and fewer job opportunities, especially in rural areas.
Economists warn the impact could be felt on employment if the trend continues.
Saifuddin argued that if leakages and mismanagement in development spending can be curbed, job creation may not suffer.
“Corruption must be curbed by any means,” he said. “If projects are implemented without irregularities, there should be no problem.”
RECURRENT BUDGET
The largest share of the proposed budget has gone to recurrent expenditure, which has been raised by Tk 283.46 billion, bringing the total to Tk 5.35 trillion for FY26.
In the outgoing budget, recurrent spending stood at Tk 5.07 trillion, later revised to Tk 5.06 trillion.
Although no clear statement was made on inflation allowance (dearness allowance), the government did propose to increase civil servant benefits under the “special benefits” category.
“In the absence of a new pay scale since 2015, we propose raising the volume of special benefits for public employees in this budget,” said Salehuddin during his budget speech.
Zahid described the recurrent budget as “inherited”, suggesting that the bulk of this year's spending commitments stem from earlier decisions.
“There are no surprises in the expenditure side, but this legacy spending is certainly ‘questionable’,” he said.
Saifuddin was also critical of the caretkaer administration’s choice to expand civil servant benefits at a time of economic discomfort.
"The crisis persists, and the economy has yet to return to normal," he said. "The government could have reduced recurrent spending. Everyone is suffering-- the additional facilities for public servants could have been postponed."
DEFICIT SMALLEST IN 14 YEARS
The proposed deficit of Tk 2.26 trillion is the lowest in 14 years. The last time the budget deficit dipped below this level was in FY2010–11, when it stood at 3.8 percent of GDP.
Since then, across three terms in office, the Awami League government has consistently kept the budget gap above 5 percent of GDP.
In the outgoing fiscal year, the initial deficit target was Tk 2.56 trillion, or 4.57 percent of GDP.
That was revised in March to Tk 2.26 trillion, bringing it down to 4 percent of GDP.
By the end of FY2025–26, if the full budget is implemented, the size of Bangladesh’s GDP is projected to reach Tk 62.45 trillion.
WHERE DEFICIT WILL BE FUNDED FROM?
After taking charge, the Muhammad Yunus government revised the current year’s budget down by Tk 530 billion in March, bringing it to Tk 7.44 trillion --in line with slow implementation progress.
Of the projected Tk 2.26 trillion deficit in FY26, Tk 1.26 trillion will be financed from domestic sources, equal to 2 percent of GDP.
This includes Tk 1.04 trillion from the banking sector (1.67 percent of GDP), Tk 125 billion from savings instruments, and Tk 210 billion from non-bank financial institutions.
The government also plans to secure Tk 1.35 trillion in foreign loans to fill the remaining gap.
In the current budget, foreign borrowing was estimated at Tk 1.27 trillion, which was later revised up to Tk 1.38 trillion.
HOW MUCH WAS BORROWED THIS YEAR
In the outgoing 2024–25 fiscal year, the government initially targeted Tk 1.60 trillion in domestic borrowing, later revised to Tk 1.17 trillion.
Of this, Tk 1.37 trillion was originally expected to come from the banking sector, later cut to Tk 990 billion in the revision.
Upon assuming power, the interim administration reduced reliance on bank borrowing to help control inflation and restore fiscal discipline.
As a result, borrowing from banks slowed significantly compared to the previous year.
As of Apr 15, the government had borrowed Tk 425.58 billion from banks --about 43 percent of the annual target.
During the same period last year, borrowing stood at Tk 464.85 billion.
