Next budget to have realistic goals

Bangladesh switches focus from macro- onto micro-centric economic activity with budgetary focus on trade expansion, job creation and investment that benefits all.

Finance Adviser Dr Salehuddin Ahmed, the custodian of the national exchequer under the post-uprising government, explained the aforesaid vision, which guided him in authoring his maiden work, during an exclusive interview with The Financial Express on Sunday.

With the economy still bearing the pass-through effect of severe disruption due to immediate-past political upheaval and its aftereffects, the finance adviser walks a tightrope in making the two ends meet for resource constraints.

"Resource gap is the main challenge in budget formulation," says Mr Salehuddin, and unveils government plans on pooling foreign funds through budget-support credits apart from domestic resource mobilisation with taxes and bank and bond borrowings.

"Our needs surpass our current reserves. While we rely on domestic sources like bank and savings certificates, we must also secure foreign loans and assistance," he adds.

The economist-turned chief of the ministry of finance in the interregnum, following the August-5th changeover in 2024, says vision of this budget for 2025-26 fiscal is to build an equitable and prosperous Bangladesh where economic and business development benefits everyone.

"Our goal is to improve the quality of people's life and make daily living easier through practical and inclusive policy measures," he told the premier financial daily of Bangladesh.

"Unlike previous governments, we are not preparing a budget filled with unrealistic promises. Instead, we are focusing on achievable, clearly defined goals within the limits of our available resources. The emphasis is on realism, responsibility, and effectiveness," he says.

He stresses the need for better coordination of fiscal and monetary policies, efficient use of allocated funds rather than indiscriminate expansion,

Dr Ahmed acknowledges that cuts in the Annual Development Programme (ADP) may impact employment as the government is avoiding large capital-intensive megaprojects for development works.

"Instead, we aim to prioritize labour-intensive, small- to medium-scale local projects," he told the FE correspondents in response to a question.

A dedicated fund will be allocated to foster innovation and increase employment through entrepreneurship of the start-ups.

On health and education allocation, Dr Ahmed says the focus would be on skills and capacity development instead of structures and buildings.

He leaves a hint at widening the gap between capital market-listed and non-listed companies in the budget, downsizing export incentives in the upcoming budget.

On the ramped-up US tariffs, Dr Ahmed lists a slew of fiscal measures to offset the fallout. One is the government has knocked down the duty on cotton import to zero.

"We have lowered duty to zero in case of 100 products that are being imported from the USA. However, importing LNG from USA is very costly for us. We will increase regional trade," he says.

On external finances for bankrolling budget deficits, he says the IMF is giving budget support by June. Not only IMF, the World Bank and ADB are also giving support.

"What we will do, this time higher dependence will be on domestic resources."

The current government wants to lower tax expenditure that refers to many tax exemptions given through SROs or statutory regulatory orders beyond budgetary sanction.

"We will cut these exemptions. RMG sector is getting tax exemptions last 40 years claiming them infant industry," he says about an indicative cost-cutting measure.

"If the government doesn't increase FDI, remittance, export, we cannot lessen dependence on foreign sources for budget implementation," the finance adviser replied to a question in the end.

For the next fiscal year, the government, headed by Chief Adviser Prof Muhammad Yunus, has decided to present a Tk 7.90-trillion contractionary budget, slightly smaller than the current outlay of Tk 7.97 trillion.

This is for the first time in the country's history the government is making a national budget smaller than the previous one, taking into consideration the financing trend in the present context, according to officials concerned.

Some Tk 5.18 trillion has been targeted as revenue earnings in the next fiscal year while the Annual Development Programme (ADP) spending has been set at Tk 2.30 trillion.

The targeted gross domestic product (GDP) growth has been set at 5.5 per cent for the next fiscal year while the budget officials have set a target to bring down the rate of inflation to 6.5 per cent, from a steep rate hovering above 9.0 per cent presently.

Also, they have decided to keep the budget deficit at Tk 2.26 trillion or 3.62 per cent of the total outlay and the size of GDP in current prices for the next fiscal year has been estimated at Tk 62.5 trillion.

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