Economists warn of risks

Eminent economists have described the proposed national budget for fiscal year (FY) 2026-27 as 'highly ambitious', warning that financing constraints and weak implementation capacity could pose significant challenges for the newly formed government.
They cautioned that failure to mobilise adequate revenue and foreign financing could force excessive reliance on the banking sector, potentially squeezing private-sector credit and slowing job creation.
The economists stressed the need for deep institutional reforms and a stronger focus on value for money, rather than routine budget implementation.
Eminent economist Dr Mustafa K. Mujeri said the budget appears designed to "please everyone", reflecting the finance minister's earlier statement that it would cater to all sections of society.
However, he noted that this approach is typical in the early budgets of a new government.
"It can be said that attention has been given to everyone in terms of allocation," he said, adding that health, education, development, entrepreneurship, start-up capital and other areas have all been addressed.
However, he emphasised that the key issue lies in implementation.
"We can achieve the desired results only if the budget is implemented properly, keeping in mind the context in which it was formulated and the allocations were made," he said.
Dr Mujeri identified two major obstacles to implementation of the large budget -- financing and the efficient use of funds.
"The revenue target set by the finance minister is impossible," he said.
He recommended structural reforms to improve revenue collection and reduce dependence on bank borrowing to avoid crowding out private sector credit.
At the same time, he warned against excessive withdrawal of funds from the banking system, saying it could create liquidity pressures and restrict private investment.
Dr Selim Raihan, Professor at the Department of Economics, University of Dhaka, said the budget is ambitious in tone but cautious in macroeconomic design.
He said it correctly identifies the economy's main challenges, including weak growth, high inflation, low revenue mobilisation, fragility in the banking sector, rising debt-servicing costs and external shocks.
He noted that the budget places emphasis on private investment, employment, social protection, education, health, energy security, deregulation and regional development, which is broadly appropriate.
Proposals on investment incentives, support for SMEs and startups, and improvements in logistics and export infrastructure indicate an intention to move beyond a narrow growth model.
However, he said the budget is stronger in diagnosis than in operational clarity.
Dr Raihan said the budget simultaneously promises stability and expansion -- lower inflation, higher investment, increased social spending, stronger revenue collection, bank recapitalisation and tax concessions -- without clearly explaining sequencing or trade-offs.
"The main challenge will be implementation," he said.
He noted that long-standing weaknesses in tax administration, public expenditure quality, procurement, project readiness, banking governance and local-level service delivery cannot be addressed through budget announcements alone.
He warned that revenue targets would be difficult to achieve without a transparent tax expenditure framework and strict performance conditions for exemptions and incentives.
Similarly, public spending in education, health and social protection would only deliver meaningful results if leakages are reduced and outcomes properly monitored.
Dr Raihan said the way forward should be disciplined and practical, with measurable reform milestones, regular progress reporting, protection of priority spending, time-bound and conditional investment incentives, stronger banking-sector governance before further recapitalisation, and safeguards against crowding out private credit.
"In short, this budget can become a useful first step, but only if it is followed by serious institutional reform rather than routine implementation," he added.
Dr M Masrur Reaz, Chairman and Founder of Policy Exchange Bangladesh, described the FY2026-27 budget as an ambitious attempt to build a welfare-oriented state and investment-led growth model, but warned that success depends on overcoming persistent weaknesses in revenue mobilisation, project implementation and governance.
In an instant reaction to The Financial Express, he said the budget outlines a broad reform agenda centred on social protection, investment promotion, deregulation and foreign direct investment, while seeking to shift the economy away from debt-driven growth.
Professor Muhammad Mahboob Ali of Bangladesh University of Business and Technology (BUBT) said the budget provides a strategic framework aimed at stabilising the economy and realigning priorities.
He said the Tk 9.38 trillion budget represents a major test for the new government, requiring a shift away from overly ambitious growth targets towards stabilisation, financial sector reform and easing inflationary pressures.
He noted that revised FY26 estimates place total revenue between Tk 5.93 trillion and Tk 7.01 trillion, while FY27 projections indicate an 18 per cent rise in income, including grants.

syful-islam@outlook.com