Promises, pitfalls and possibilities

The FY2026-27 national budget, totalling Tk 9.38 trillion (9.38 lakh crore), is Bangladesh's largest-ever budget. The government aims for 6.5% GDP growth, 7.5% inflation, and Tk 6.95 trillion (6.95 lakh crore) in revenue collection, while keeping the fiscal deficit of Tk.2.43 trillion (2.43 lakh crore) which is 3.6% of GDP. Development expenditure has been increased by nearly 47% to Tk3.16 trillion (3.16 lakh crore), while operating (non-development) expenditure is estimated at around Tk 6.22 trillion (6.22 lakh crore), reflecting a strong growth-oriented stance.
A. Promises: Towards a Democratic, Humane and Inclusive Economy
The FY2026-27 budget aims to build an inclusive economy through expanded social protection, women's empowerment, and improved targeting via digital systems like automation and the Dynamic Social Registry (DSR). At the same time, it supports a pro-business growth agenda.
Key pro-business measures include (a) Increased Annual Development Programme (ADP) allocation of around Tk 3.16 trillion (3.16 lakh crore), aimed at accelerating infrastructure, transport, energy, and local government projects that directly support private-sector productivity, (b) The budget introduces a digital one-stop service system to streamline business registration and licensing processes, targeting completion within 7 working days. This initiative aims to reduce bureaucratic delays by integrating approvals across relevant agencies into a single online platform. It is expected to significantly improve the ease of doing business, investment speed, and regulatory efficiency. (c) The budget rationalises customs duties and taxes on selected capital machinery, industrial raw materials, renewable energy equipment, and electric vehicles to lower production and investment costs. This aims to encourage industrial expansion, green energy adoption, and technology upgrading across key sectors. Reduced import duties on machinery and inputs are expected to improve cost competitiveness and productivity. The measures also support private investment and align with the broader goal of sustainable, export-oriented growth. (d) The budget emphasizes developing the capital market and bond market as key alternative sources of long-term financing, reducing reliance on bank borrowing. It focuses on expanding government securities, corporate bonds, infrastructure bonds, green bonds, and sukuk instruments to mobilise investment for large projects. Strengthening the role of the Bangladesh Securities and Exchange Commission (BSEC) is highlighted to improve regulation, transparency, and investor confidence. These measures aim to deepen market liquidity and create a stable financing base for sustainable economic growth. (e) The budget focuses on creating a more investment-friendly tax environment through stability, predictability, and administrative reforms. The budget offers a balanced package of tax relief and investment incentives by raising the tax-free income threshold for individuals including early filing incentives and late filing penalties, maintaining preferential tax rates for compliant and listed companies, and continuing tax holidays and concessional tax regimes for priority sectors such as ICT, high-tech industries, economic zones, renewable energy, infrastructure, and PPP projects. Duty rationalization on capital machinery and industrial raw materials, coupled with significant tax reductions for electric vehicles and green technologies, aims to lower business costs and promote sustainable investment. At the same time, digital tax administration, expanded TIN-based compliance, and simplified investment procedures are expected to improve the ease of doing business, attract FDI, and support export diversification while broadening the tax base. In addition to these, 3R Strategy (Recovery & Stabilization, Restoration, and Reconstruction for Acceleration) has been adopted to stabilize the economy, restore institutional and economic capacity, and subsequently rebuild development foundations to accelerate long-term, inclusive growth.
Financial Sector and Governance Reforms
The budget places unusual emphasis on institutional reforms rather than merely expenditure expansion. Major reform commitments include:
— Banking sector restructuring and stronger supervision.
— Reduction of non-performing loans (NPLs).
— Expansion of digital tax administration and automation.
— Mandatory tax identification measures for greater formalisation of the economy.
— Strengthening fiscal transparency and public financial management systems.
— Policy emphasis on banking sector restructuring and liquidity discipline, aimed at improving banks' ability to lend to productive private-sector activities.
These initiatives indicate a shift from traditional expenditure-led budgeting toward governance-led economic management.
Social Protection and Women's Empowerment
The budget allocates approximately Tk 1.44 trillion (1.44 lakh crore) for social protection programmes, representing around 16% of total expenditure. The flagship Family Card Programme alone is expected to cost around Tk 145 billion (14,500 crore), targeting millions of low-income households to protect them from vulnerabilities.
Additional measures include:
— Increased allowances for widows and abandoned women.
— Expansion of disability benefits and educational stipends.
— Increased coverage under mother-and-child support programmes.
— Enhanced healthcare assistance for critical illnesses.
— Continued emphasis on women entrepreneurs and financial inclusion.
Governance and Digital Transformation
The budget emphasizes tax modernization through expanded digital NBR systems, including online filing, e-payment, and wider TIN coverage to improve compliance. It introduces automated public financial management and e-procurement to enhance transparency and control expenditure. Banking governance reforms aim to strengthen oversight and reduce financial sector risks. It also expands data-driven beneficiary selection (DSR) and digital service delivery to reduce leakages and improve accountability.
B. Pitfalls: The Execution Challenge
Revenue Ambition versus Reality
The greatest risk lies in the revenue target. Bangladesh continues to have one of the lowest tax-to-GDP ratios in Asia, around 7%, while the NBR has been assigned an exceptionally ambitious collection target. Compared to FY2025-26, where revenue shortfalls forced downward revisions and increased reliance on domestic borrowing, the current target appears similarly stretched without a significant expansion of the tax base. Persistent challenges in compliance gaps, informal economy dominance, and administrative capacity constraints raise concerns over realistic achievement. As a result, any underperformance is likely to widen the fiscal deficit and increase borrowing pressure on the banking sector.
Development Spending Absorption Capacity
Although development expenditure has been significantly increased, implementation performance remains a concern. Recent ADP implementation rates have remained below expectations, suggesting that the challenge is not merely allocation but the capacity to execute projects efficiently and on time. Delays, cost escalations, and procurement bottlenecks continue to undermine development outcomes. Weak project selection, limited real-time digital monitoring, slow procurement processes, and inadequate accountability of implementing agencies have persisted in the past, undermining timely and cost-effective implementation of development projects.
Reform Implementation Risk
The budget's success depends heavily on reforms in: Tax administration, Banking governance, Public procurement, Capital market regulation and State-owned enterprise management
Historically, these reform areas have faced resistance from vested interests and bureaucratic inertia. Without strong enforcement, policy announcements may not translate into actual change.
Governance and Corruption Concerns
Despite higher allocations, Bangladesh's development outcomes remain constrained by persistent weaknesses in procurement integrity, project supervision, and institutional accountability. In past budget cycles, irregularities in tender processes, delays in contract execution, and limited monitoring of project quality have reduced the efficiency of public spending. This results in cost overruns, delayed delivery of infrastructure, and reduced value for money. As budget size expands, the challenge of ensuring transparent procurement, stronger audit enforcement, and real-time project monitoring becomes even more critical to safeguard fiscal effectiveness and development impact.
C. Possibilities: Harvesting the
Budget's Potential
The budget's greatest opportunity lies not in its size but in the effective execution of its reform agenda, which can meaningfully strengthen investment climate, revenue mobilisation, and public sector efficiency. If implemented successfully, key reforms such as end-to-end digital governance systems, expanded NBR automation for tax filing and compliance, and real-time fiscal monitoring tools can significantly reduce leakages and improve transparency in public administration.
In the financial sector, stronger banking discipline, reduced non-performing loans, and improved credit allocation to productive sectors can enhance capital flow to SMEs, manufacturing, and export-oriented industries. The introduction of faster business approval systems and streamlined one-stop digital licensing can further reduce time and cost of doing business, improving Bangladesh's investment competitiveness.
On capital markets, reforms aimed at deepening government securities, corporate bonds, and alternative financing instruments can diversify funding sources beyond the banking sector. Meanwhile, strengthened social protection targeting through the Dynamic Social Registry (DSR) can improve efficiency, reduce duplication, and ensure better support for vulnerable households.
Together, these governance, financial, and institutional reforms have the potential to build a more productive, transparent, and investment-friendly economy, strengthening Bangladesh's readiness for post-LDC graduation and global competition.
However, these gains are conditional on execution discipline and institutional coordination.
Finally, the FY2026-27 budget is less about spending and more about execution. Its promises are substantial: investment promotion, tax modernization, financial sector reform, women's empowerment, and governance improvement. Its pitfalls are equally clear: weak implementation capacity, revenue uncertainty, institutional resistance, and corruption risks. The budget's ultimate success will depend on whether the government can transform its reform commitments into measurable outcomes. If implementation matches ambition, FY2026-27 could become a turning point for Bangladesh's economic governance and investment landscape.

The writer is a Fellow Member of ICAB and Partner at Basu Banerjee Nath & Co.,a Chartered Accountants firm.