Every budget rests on a macroeconomic narrative. The FY27 budget assumes that stabilisation will give way to recovery, growth will accelerate, inflation will decline, revenues will rise sharply, and the fiscal deficit will remain broadly contained. None of these assumptions is impossible. The question is whether they can all be achieved simultaneously.
The starting point matters. Just days before the budget, the Bangladesh Bureau of Statistics released its provisional estimate for FY26 growth: 4.14 per cent. Industrial growth slowed to below 3.0 per cent, manufacturing expanded by only 3.3 per cent, and the investment ratio fell below 28 per cent of GDP. These are not the characteristics of an economy already on a strong recovery path. They are the characteristics of an economy still searching for momentum.
Yet the government's medium-term framework projects growth accelerating to 6.5 per cent in FY27 and continuing to rise thereafter. That difference is not merely statistical. A recovery from 5 per cent to 6.5 per cent would be ambitious but plausible. A jump from 4.14 per cent to 6.5 per cent requires a much stronger acceleration in investment, exports and productivity than is currently visible.
The medium-term framework makes clear that investment is expected to drive much of this recovery. Growth accelerates because private investment recovers, productivity improves and regulatory reforms take effect. This is, in principle, a sensible strategy. Bangladesh cannot sustainably return to high growth through public spending alone.
The challenge is that the framework assumes a recovery in investment before demonstrating convincingly that the conditions for such a recovery are already in place. Private investment has been weakening as a share of GDP, business confidence remains fragile, the banking system continues to constrain credit creation, and energy-sector weaknesses persist. The budget contains several promising reform initiatives, but reforms typically influence investment decisions with a lag. The projected acceleration therefore appears to arrive more quickly than its underlying drivers.
Inflation presents a similar challenge. The government correctly identifies inflation control as the immediate macroeconomic priority and the medium-term framework assumes a gradual return to price stability. Yet inflation remains above 9.0 per cent and has repeatedly exceeded official projections. More importantly, stabilization and rapid growth do not always move together. Tight monetary conditions, positive real interest rates and continued macroeconomic adjustment may be necessary to reduce inflation, but they can also weigh on investment and demand in the short run. The framework assumes that inflation declines while growth accelerates sharply. That outcome is possible, but far from assured.
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