Setting a realistic, feasible ADP target

At a time when the growth is below historical averages, inflation is high and economy navigating an uneven and fragile recovery trajectory, fiscal prudence in matters of budgetary spending is only desirable. So, at such times, it is rather surprising to see that the proposed Annual Development Programme (ADP) for FY (2026-27) is as high as Tk 3.0 trillion and that is a 50 per cent increase over the revised ADP for the current year (FY26). Notably, over 63 per cent of the ADP finance is coming from the government sources, while development partners are supposed to provide the rest 37 per cent. Overall, it looks, as though, the economy is not under any constraints. But, on the contrary, many analysts are of the view that the ADP for FY27 is highly ambitious and challenging. Notably, the project aid target in the upcoming ADP is proposed at Tk 380 billion.
When external soft loans for projects are tapering off, sources of the proposed project fund would obviously be costlier ones. The external loans would be high interest-bearing once Bangladesh graduates from its LDC status by the end of 2026. In that case, it is no doubt going to put an additional pressure on the overall economy. When such foreign loans for ADP project spending are being sought before a probable transition of the economy, the debt burden it would entail is by any measure going to be risky. Moreover, when the government is aiming to use this record budget to stimulate growth after a period of slow implementation (only 30 per cent of project fund was spent as of February 2026, which is 16-year low), the budget's heavy dependence on foreign aid raises questions about debt sustainability. Now, inefficiencies and their attendant delays in project implementation being legendary, one would then reasonably question the wisdom of raising the ADP budget by a big margin and that is more so because the issue of sloppy administrative culture is yet to be effectively addressed.
Given such structural deficiencies, undertaking of mega projects would not be well-advised. Prime Minister Tarique Rahman also recently pointed to alleged inflated spending and corruption in such mega projects. Speaking of foreign debt issue, it may be noted that in FY25, debt servicing reached Tk 500 billion, and to make matters worse, debt repayment costs are rising faster than new loans are being received. Foreign loans apart, domestic revenue mobilisation has also remained weak. Thus, the large ADP has the potential to fuel inflationary pressure if the government resorts to infuse high-powered money in the economy for bankrolling projects.
However, there is a need for accelerating economic activity after a retarded pace of growth in the past years. But other drivers of the economy such as private sector growth, foreign direct investment and so on not being very promising, enhanced fiscal spending alone can hardly help stimulate economy. What is still reassuring is that the ADP for the next fiscal focuses on social sectors with allocations for education and health doubled. So, the increased fiscal spendings in these sectors, as proposed, by the incumbent government no doubt deserves appreciation considering its potential long-term gains for the economy. Even so, such prospect would predicate upon reforms in project execution, reducing reliance on expensive foreign loans and strengthening of domestic resource mobilisation. Now, the revised budget for FY26 and the budget for next fiscal to be finalised by the National Economic Council (NEC) on May 18 will determine if this ambitious ADP target is adjusted to a more realistic level.