Government targets efficient public expenditure, higher revenue

Amid mounting fiscal pressure and growing development needs the government has embarked on a medium-term reform agenda aimed at making every taka of public spending count while strengthening revenue collection and safeguarding debt sustainability.

The strategy outlined in the FY2026-27 national budget seeks to improve the quality and efficiency of public expenditure, raise the country’s revenue base, and reduce reliance on debt-driven growth as Bangladesh navigates a challenging economic environment marked by inflationary pressures and global uncertainties.

At the heart of the reform agenda is a strategic expenditure framework designed to ensure that public spending is aligned with national development priorities and delivers maximum economic and social returns.

Priority sectors include infrastructure, education, healthcare, energy, agriculture and employment-generating activities, according to budget document.

It also states that public investment in education and healthcare will be gradually increased to 5 per cent over time.

Future development projects will undergo economic appraisal, cost-benefit analysis and implementation-readiness assessments to ensure value for money and maximise development impact.

The budget document notes that the government intends to improve expenditure efficiency through the rationalisation of non-priority spending and stronger fiscal discipline across public institutions.

Subsidy programmes are expected to become more targeted and efficient so that benefits reach intended recipients while limiting fiscal pressures. Support for agriculture, food security and energy supply will continue, although inefficient subsidy arrangements will be reviewed and reformed, according to the document.

The document also highlighted reforms aimed at making social protection programmes more targeted, inclusive and effective through greater use of technology, digital beneficiary databases and enhanced monitoring systems.

Technology-based systems in public procurement, project implementation and budget management are also expected to be strengthened to improve transparency, accountability and efficiency, it added.

Bangladesh’s revenue-to-GDP ratio currently stands at around 8 per cent, while the tax-to-GDP ratio is about 6.8 per cent.

The government aims to raise these ratios to 11 per cent and 9.6 per cent respectively by FY2030-31 through policy and administrative reforms.

The document said that the government seeks to improve the country’s debt sustainability and restore Bangladesh’s debt risk rating from the current “moderate” category to a “low” risk category through stronger revenue mobilisation, sustainable budget deficits and modernised debt management.

The government intends to reduce dependence on debt-financed growth and promote production, employment and private investment as key drivers of long-term economic development, it added.

For FY2026-27, the government proposed a record public expenditure programme of Tk 9.38 lakh crore, marking an increase of about 19 percent from the original Tk 7.90 lakh crore budget of the previous fiscal year.

The expansion reflects the government’s strategy to stimulate economic recovery, strengthen public services and accelerate infrastructure development amid ongoing fiscal and inflationary pressures.

Total public spending is estimated at around 13.7 percent of GDP, up from 12.7 percent in FY2025-26, indicating a more expansionary fiscal stance.

Of the total outlay, the Annual Development Programme (ADP) has been set at Tk 3 lakh crore, a 30 percent increase over the previous year’s allocation, with Tk 1.90 lakh crore expected from domestic resources and Tk 1.10 lakh crore from foreign loans and grants.

The government prioritised investment in transport and communication networks, power and energy, education, healthcare, agriculture, employment generation and social protection programmes to enhance productivity and support long-term growth.

Revenue collection has been targeted at Tk 6.95 lakh crore, leaving a budget deficit of roughly Tk 2.43 lakh crore, which will be financed through domestic and external borrowing.

The budget also placed emphasis on improving expenditure efficiency through a strategic expenditure framework, under which major spending decisions will be assessed based on their economic and social returns.

According to budget documents, non-development expenditure stands at around Tk 6.38 lakh crore, reflecting significant commitments to salaries, pensions, subsidies, interest payments and social safety net programmes.

The increased spending is expected to support the government’s growth target of 6.5 percent and inflation target of 7.5 percent while advancing reforms aimed at modernising infrastructure, strengthening human capital and fostering inclusive economic development across the country.