Revised budget warrants a balancing act

The mid-year budget revision for fiscal year 2025-26 has placed the interim government in an undeniably difficult position. On the one side lies a formidable financial crunch; on the other, persistent demands from ministries and agencies for the full release of their allocated funds. Reconciling these opposing pressures will require not only a meticulous recalibration of the budget but also prudent execution for the remainder of the fiscal year. While this is a reality the finance division has to encounter every year, the situation this year is more difficult as it involves a cautious balancing of critical factors. 

No doubt, the current situation serves as a timely reminder for ministries and divisions to prepare realistic funding requests in the revised budget so that the government can limit excessive bank borrowing and its associated interest burden. The Finance Division has reportedly begun consultations with relevant agencies, issuing cautionary guidance to help streamline spending in line with revenue realities. Yet reports indicate that certain ministries insist they will require their entire operating budgets, despite clear signs of fiscal stress. The finance authorities, noting the slower-than-expected revenue flow earlier in the year, have urged ministries to strictly adhere to austerity directives.

A report in this newspaper underlines, citing senior finance ministry officials, the gravity of the situation: nearly one-fifth of the government's annual operating expenditure goes towards paying interest on domestic loans. Debt-servicing obligations have risen steadily, and for the current fiscal year alone, Tk 1.0 trillion has been allocated for interest payments on domestic borrowing. Against this backdrop, the need for realistic, carefully justified fund demands cannot be overstated.  The government's cautious tone also reflects its immediate spending commitments-several of which are unavoidable. Approximately Tk 30 billion will be required to conduct the forthcoming national elections. In addition, the recent decision to raise house-rent allowances for MPO-listed teachers is expected to add another Tk 40 billion to the expenditure burden. Furthermore, the government has pledged around Tk 200 billion to capitalise the newly established United Islamic Bank, created to stabilise five distressed Islamic banks. These commitments, though necessary, will significantly strain public finances, requiring  higher borrowings from the banking and treasury systems unless offset elsewhere.

Given the scale of these pressures, revenue mobilisation emerges as the pivotal determinant of fiscal stability. Encouragingly, according to the National Board of Revenue (NBR) sources, revenue collection has gained momentum, posting over 15 per cent growth during the July-October period. If this upward trend continues, the government's reliance on bank borrowing for deficit financing could ease somewhat. Even so, the road ahead remains challenging. Austerity can help contain spending but cannot, on its own, bridge the fiscal gap. Ultimately, the government's ability to navigate the remainder of the year will depend heavily on how effectively it can mobilise domestic revenue-especially tax revenue-while enforcing disciplined expenditure across ministries. In this delicate balancing act, prudent financial stewardship will be crucial to maintaining stability amid tightening fiscal constraints.