Economists may think differently, but it appears that politicians and bureaucrats think alike when it comes to framing the budget document. The BNP government’s budget for FY2026-27 has an uncanny similarity to the former Awami League (AL) government’s budget for FY2009-10. Both budgets were the first presented after their respective regimes’ landslide election wins, following an interim administration. Both blamed the past regime that preceded their respective interims, and both remain structurally similar.
The AL regime announced its budget for FY2009-10, amounting to almost Tk 1.14 lakh crore. If we assume the entire budget to be equivalent to Tk 100, its revenue target was Tk 74, leaving a fiscal deficit of Tk 26. The BNP government’s budget for FY2026-27 amounted to Tk 9.38 lakh crore, and its revenue target is still 74 percent, while the deficit is 26 percent. However, the financing pattern is slightly different. While the AL regime planned to draw Tk 18 from domestic sources and Tk 8 from foreign sources, the BNP regime planned to raise Tk 14 from domestic sources and the remaining Tk 12 from foreign sources.
If we deconstruct FY2009-10 budget, we get 71 percent for current operational expenditure, while the corresponding figure in the FY2026-27 budget is 66 percent. Thus, we see that the BNP government allocated 34 percent of its budget for development expenditure while the AL government allocated 29 percent for the same. Budget allocations are often rosy, and all governments revise their numbers in the end. Commonly, development budgets are never fully utilised, while operational expenses are closer to their allocations, suggesting bureaucratic inefficiency as well as political ineptitude.
The proof of the pudding is in the eating, and revised budgets are the true indicators of the efficiency of each government. The last revised budget of the AL regime was for FY2023-24, where Tk 7.14 lakh crore was spent, although the proposed expenditure had been Tk 7.62 lakh crore. If the revised expenditure sum is scaled down to Tk 100, revenue collection reached Tk 67, leaving Tk 33 as fiscal deficit. The regime collected Tk 22 from banking and other domestic sources, and Tk 11 from foreign funds. Its distribution between operational costs and development spending followed a 64:36 ratio. The upcoming fiscal year’s budget by the BNP government similarly follows a 66:34 ratio, making no fundamental difference in the budget’s structure.
In the post-pandemic years of the AL regime, budgets were increasingly reliant on domestic borrowings. The incoming budget attempted to reverse the course. For example, domestic borrowing constituted as high as 22 percent of the FY2023-24 revised budget, while the corresponding amount is only 14 percent in the FY2026-27 budget. Foreign borrowing in the budget for the upcoming fiscal year is 12 percent, while it was 11 percent in the revised FY2023-24 budget by AL. Domestic borrowings come at a price since they crowd out private enterprises, and the new budget smartly made the share of domestic borrowing lower than that in FY2023-24’s budget. The 2026-27 budget also attempts to strike a balance between the sources of borrowing. Foreign loans are not simply money; they come along with rules, regulations, and disciplinary guidelines required to ensure the best use of resources for the government.
Though critics doubt that collecting Tk 6.95 lakh crore will be possible as the tax-GDP ratio gradually deteriorated both during the post-Covid era of AL and the immediate past interim government, a target of covering 74 percent of the budget by revenue collection is inspiringly correct. A budget is typically termed “ambitious” for two reasons: its large size and a high revenue target, and the proposed budget has surely earned that accolade. But its 34 percent allocation for developmental outlays, particularly during this time of fiscal debility, credit crunch, slow growth, and pay-scale adjustment, lends credence to the government’s futuristic attitude.
Despite some positive trends in the budget’s structure and direction, it does misrepresent some points. In the discussion of the external sector, the absence of any comments on the recent trade deal with the US is quite conspicuous and frustrating. The finance minister seems to be unhappy as the value of the taka has fallen since 2006. It took Tk 68 to buy one US dollar in 2006 and this rate peaked at Tk 122 in 2024. It is a conceptual mistake when the finance minister attempts to see it as a sign of discredit.
The nominal exchange rate (NER) must follow the path of the real effective exchange rate (REER) to ascertain stability in the balance of payments (BOP). Developing countries are destined to devalue their currencies against the US dollar since their inflation rates are usually higher than those of their developed counterparts. Hence, devaluation of the taka is good for export competitiveness, import control, and remittance increment, all of which boost reserves by improving the BOP.
The budget speech claimed that Bangladesh’s economic engine has been absolutely devastated after going through continuous debility for more than a decade and a half. While making such a claim may appear politically palatable to some quarters, placing such a statement in a budget document endorses poor taste and bad economics.
As World Bank data suggests, Bangladesh’s nominal per capita GDP was $490 in 2006, and it reached $2,593 in 2024. How does a rise in per capita income by more than five times relate to the “devastation story” in the finance minister’s vocabulary? A rise in per capita GDP is not only a development barometer; Bangladesh would never have been able to qualify for LDC graduation without GDP growth. Acknowledging the past is a decorum in economics when examining a country’s development path, which is always cumulative.
Enhanced attention to both education and health has remained the strongest side of the FY2026-27 budget. It is facing the modern world by ensuring quality education incorporates culture, debate, multilingualism, sports, creative learning, innovation, and artistic diversity. This is the most pragmatic facet of the budget. Such an attitude towards education and health will not only improve the quality of manpower but also contribute to growth in a nation where unemployment is the root of myriad social ills.
The budget is inspirationally correct, while it confronts some challenges of revenue collection and implementation of development projects. The budget must be ambitious for a new government, and that is exactly how it appears to be. The targets are not quite disproportionate to the numbers that resided in past budgets of recent years.
Dr Birupaksha Paul is professor of economics at the State University of New York at Cortland in the US.
Views expressed in this article are the author's own.
Follow The Daily Star Opinion on Facebook for the latest opinions, commentaries, and analyses by experts and professionals. To contribute your article or letter to The Daily Star Opinion, see our guidelines for submission.
