As Bangladesh prepares to unveil the national budget for the fiscal year 2025–26, the Ministry of Finance has formally identified eight pressing economic challenges. With the country still revolving from administrative disorder, inflationary shock and structural inefficiency, this budget is not merely financial evidence— it is an assessment of vision, resolve and reform.
Over the past few years, the country’s economic engine has been losing momentum. Although a fresh management took power following the July 2024 mass uprising, deep-rooted challenges have remained. Administrative indecision, a slow-moving investment environment, growing unemployment and debt burden continues to hamper recovery.
In a pre-budget assessment, the Finance Ministry outlined eight major challenges. These are: high and persistent inflation, food and energy insecurity, shortage of skilled manpower and employment opportunities, weak social safety net coverage, low revenue generation, deteriorating business and investment environment, LDC graduation pressures and limited industrial productivity.
Each of these challenges highlight a structural fault line—together, they represent a comprehensive crisis of policy, governance, and economic direction.
Investment, the backbone of any growing economy, has taken a substantial hit. Bangladesh Bank data reveals an around 30 percent drop in the opening of LCs for capital machinery in the first eight months of the current fiscal year, with LC settlements falling by 25 percent. This sharp contraction is a clear signal that businesses are reluctant to expand under current conditions.
The consequences are visible on the labour market. The Bangladesh Bureau of Statistics (BBS) reports that the number of unemployed youths rose by over 330,000 in a single year, reaching 2.73 million by December 2024. Administrative unrest and factory disruption following the regime change have only deteriorated the situation, mainly in labour-intensive sectors like garment industry.
The message is clear that with no restoring investors’ confidence and generating employment opportunities, economic growth will remain uneven and exclusionary.
Tax revenues continue to fall short of targets. As of March 2025, the National Board of Revenue (NBR) had mobilised only Tk 2.56 trillion, Tk 650 billion below the target. For the upcoming budget, the management aims to raise Tk 5.56 trillion in total revenue—of which Tk 4.99 trillion is expected from the NBR.
This gap reflects both a narrow tax base and poor enforcement. While new measures are expected to automate collection and expand VAT, deeper reforms are needed to make taxation equitable and efficient. The country cannot continue to rely on borrowing to finance development.
The country’s public debt has ballooned to over Tk 18.5 trillion, with the management planning to borrow another Tk 2.3 trillion in the new fiscal year. Of grave concern is the rising cost of debt servicing. Interest payments alone are projected at Tk 1.33 trillion in FY2025–26— 15 percent higher than the current fiscal year.
This means over one-sixth of the national budget will be spent just on paying interest, not building schools, hospitals or roads. Such a trend is unsustainable and must be addressed through prudent fiscal discipline and reduced reliance on borrowing.
The proposed budget for FY2025–26 stands at Tk 7.9 trillion. While slightly smaller than previous years, its composition suggests a shift in priorities:
• Operating expenditure: Tk 5.5 trillion
• Development expenditure: Tk 2.4 trillion
• ADP allocation: Tk 2.3 trillion
While the management appears to be prioritising social safety nets and rural infrastructure, critics argue that this contraction in development spending may hurt long-term growth, unless supported by major policy and efficiency gains.
The experts emphasise the importance of broadening the tax base rather than raising tax rates. He urges greater investment in education, health and employment, warning that a short-sighted budget will fail to protect the vulnerable or inspire economic momentum.
Former World Bank lead economist Zahid Hussain has considered the proposed Tk 7.9 trillion budget too ambitious given the current macroeconomic conditions. He recommends a more conservative, realistic framework that can actually be implemented.
The experts caution against populist or politically motivated mega-projects, suggesting that the management focus on effective utilisation of funds and reduce waste.
This budget is not just about balancing numbers—it is about regaining direction. The eight challenges identified by the Finance Ministry are not abstract—they are real, measurable and impactful. But they also offer a blueprint for reform:
• Curb inflation through prudent monetary and fiscal coordination.
• Enhance food and energy security with targeted subsidies and smart import strategies.
• Create jobs via rural infrastructure, skills training, and SME support.
• Expand safety nets to protect the poor amid rising prices.
• Reform taxation for equity and efficiency.
• Incentivize investment by ensuring political stability and regulatory clarity.
• Accelerate LDC graduation preparedness by investing in competitiveness and export diversification.
• Boost industrial productivity through digitization, energy efficiency, and logistic upgrades.
Bangladesh stands at a fiscal and political crossroads. The 2025–26 budget must not be a patchwork of political appeasement and fiscal overreach. It must be bold yet balanced, realistic yet forward-looking.
This is a moment for responsible economic stewardship. The management must acknowledge the constraints, face the truths and act with integrity. Only then can this budget become a turning point—restoring trust, stimulating growth and putting Bangladesh back on the path to collective prosperity.
Raj Kiron Das, Editorial Assistant at Bangladesh Post and Founder of the Equal Rights Organisation (ERO), can be contacted at
ragbirajmcjru@gmail.com.
