Budget falls short of structural reforms: Economists

Economists and private sector entrepreneurs said that the budget for the next fiscal year 2025–2026 falls short of introducing the structural reforms needed to spur economic growth, rebuild investor confidence, and reverse the ongoing economic slowdown.

Although the government has set a 5.5 per cent GDP growth target for the next fiscal year, they said on Thursday that the projection appears overly ambitious amid persistent inflation, weak private investment, and a sharp fall in capital machinery imports.

These remarks came during a post-budget analysis organised by the Policy Research Institute (PRI), which also featured the unveiling of its Monthly Macroeconomic Insights (MMI) under the Centre for Macroeconomic Analysis (CMEA).

Dr Sheik Moinuddin, special assistant to the chief adviser at the Ministry of Road Transport and Bridges, attended the event as chief guest, while PRI Chairman Dr Zaidi Sattar and Principal Economist Dr Ashikur Rahman presented the keynote speeches.

The keynote reveals that the provisional GDP growth for the outgoing fiscal year has been estimated below 4 per cent, the lowest rate since the COVID-19 shock in FY20, with private investment dropping to just 22.48 per cent of the GDP.

It highlighted that this investment decline—along with falling FDI and weak capital goods imports—signals diminished investor confidence, driven by high interest rates, inflation risks, and worsening governance challenges.

Inflation remains elevated, with a 12-month average of 10.21 per cent in April, while the central bank has kept its policy rate unchanged at 10 per cent for the seventh consecutive month to curb inflation.

Dr Sheik Moinuddin, said Bangladesh lacks a coordinated infrastructure plan aligned with economic development due to absence of a unified vision connecting transport investments to economic growth.

He criticised the fragmentation across ministries—road, rail, and waterways—all operating with separate priorities and little coordination. “We need an integrated authority overseeing all transport sectors, as seen in many developed countries,” he said.

Dr Moinuddin also pointed to Bangladesh’s lengthy procurement process, where some projects take over five years for approval, inflating costs significantly.

Real wages continue to erode as the wage rate index has grown more slowly than prices, weakening household purchasing power and deepening concerns about the cost of living across income groups, said Dr Ashikur Rahman.

The fiscal position remains fragile, with the NBR collecting only 69.5 per cent of its revised target by May, leaving a potential shortfall of over Tk 1.0 trillion by fiscal year-end.

Despite setting a higher revenue target for the next fiscal year, it is unrealistic given the current tax base, poor compliance, and the absence of broad-based reforms in the country’s tax system, said Dr Zaidi Sattar.

Development spending also remains weak, as ADP implementation fell to a record low of 41.3 per cent in the first ten months of the current fiscal, limiting the budget’s impact on economic activity and infrastructure development.

While remittances and exports have shown positive trends, PRI warned that without deeper reforms in trade, taxation, and governance, the budget’s macroeconomic targets will be difficult to achieve or sustain.

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