Budgetary constraints stifling development

The preparation of Bangladesh's national budget is exposing a structural weakness: non-discretionary liabilities are gradually displacing the vital resources for development, posing a significant challenge to attaining rapid and sustainable growth. Operating expenses and interest payments on both domestic and international debt now account for a sizable amount of the annual budget. Although managing this debt is inevitable, the enormous amount needed for these purposes --- typically one of the largest in the budget --- severely limits the amount of money available for important discretionary investments in the Annual Development Programme (ADP). Because of this structural rigidity, rather than austerity in operating expenses, any new economic shock or revenue deficit directly results in cuts to development programmes.

The appalling execution of the ADP is a clear indication of the repercussions. According to recent sources, the last fiscal year's ADP implementation fell to a record low of 67.85 per cent, the lowest in 20 years. This underutilisation of allotted development funds is an economic paralysis rather than merely an administrative error. The country suffers losses on two fronts when investing in important initiatives in areas like health and education: first, the immediate costs of project delays and cost overruns, and second, the depletion of human capital and long-term productive capability.

Radical revenue reform must take precedence over expenditure management in order to address this. The government is forced to rely significantly on borrowing due to the ongoing substantial shortfall in NBR revenue collection, which frequently misses targets by enormous margins. This creates a negative feedback cycle that further increases the burden of interest payments. Expanding the revenue base and enforcing tax compliance through extensive institutional and digital transformation is the only viable course of action. The government can finally recapture the fiscal space required to finance important development initiatives and ensure a resilient economic future by obtaining a higher, stable, and predictable revenue stream.

Suraiya Fahmida Twinkle

Bachelor of Business Administration

North South University

suraiya.twinkle@northsouth.edu