Development Expenditure Reduced, Increased Allocation for Operating Costs: Upcoming 2025-26 Budget

Staff Correspondent

In the preliminary proposal for the 2025-26 fiscal year budget, the government has finalized plans to significantly cut development expenditure while increasing operating costs.

The proposed allocation for the Annual Development Programme (ADP) is set at Tk 230,000 crore, which is Tk 35,000 crore less than the previous fiscal year. This is the lowest allocation in the last four fiscal years. On the other hand, operating expenditure has been proposed at Tk 560,000 crore, which is Tk 28,000 crore more than the current fiscal year.

The total budget size has been set at Tk 790,000 crore, approximately Tk 7,000 crore less than the revised budget for the current fiscal year. The budget is scheduled to be presented on June 2.

According to sources in the Ministry of Finance, the primary reason for budget contraction is the increased expenditure on interest payments for domestic and foreign loans. In the current fiscal year, this expenditure is set at Tk 113,500 crore. For the next fiscal year, it could exceed Tk 133,000 crore, accounting for 16.8% of the proposed budget.

Economist and former Governor Dr. Salehuddin Ahmed commented, “This is not just a routine budget but also a framework for structural reforms. Future governments can work based on this foundation.”

The revenue target for the new fiscal year has been set at Tk 499,000 crore, which is 7.6% higher than the revised target for the current fiscal year.

To achieve this target, key steps such as the separation of policy and administration at the National Board of Revenue (NBR), reforms in the VAT structure, and reduction in tax exemptions are being undertaken.

Bangladesh’s tax-to-GDP ratio is only 7.4%, one of the lowest in South Asia and globally. According to the World Bank, this is a “deep structural weakness.” The size of the ADP for the 2025-26 fiscal year is set at Tk 238,000 crore, about 14% less than the current fiscal year. In the 2024-25 fiscal year, the ADP size was Tk 278,289 crore.

Government data indicates that the ADP implementation rate in the first nine months of the current fiscal year was only 36.65%, the lowest in 15 years. Despite allocations, inefficiencies in implementation raise questions about the government’s capacity and accountability.

Dr. Fahmida Khatun, Executive Director of the Centre for Policy Dialogue (CPD), said, “If there is no capacity to implement development, budget contraction is logical.”

The ADP is expected to be approved at the National Economic Council (NEC) meeting on May 18.

Economists believe that public participation in budget planning is limited. The interim government is preparing this budget, disregarding public opinion.

Professor Dr. Mohammad Abu Yusuf of Dhaka University said, “Taxpayers have the right to know how their money is being spent. Budget oversight opportunities make it easier to ensure proper use of funds.”