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The government has imposed a strict expenditure ceiling on all ministries and divisions as part of its ongoing austerity measures amid mounting fiscal pressures and slower revenue growth.
According to a recent directive from the Ministry of Finance, total expenditure in the revised budget for fiscal year 2025-26 - covering both operational and development outlays - must remain within the overall ceiling set in the proposed budget.
The circular, issued on October 26, clearly states that no additional allocations will be considered under any circumstances. Ministries and divisions have therefore been asked to reprioritise and cut back on less essential expenses to stay within the limit, said a senior official at the Finance Division.
"The instruction aims to maintain fiscal discipline, prevent unnecessary spending, and manage the widening budget deficit amid concerns over shrinking foreign aid and a growing subsidy burden," the official said.
"We have to live within our means. Ministries have been told not to expect any additional fund allocations," he added, noting that even development projects will face tighter scrutiny in fund releases.
REVENUE SHORTFALL LIMITS FISCAL SPACE
Despite ongoing efforts to boost domestic resource mobilisation, the National Board of Revenue (NBR) continues to struggle to meet collection targets. Officials admit that VAT and income tax receipts have grown slower than projected, while customs revenue has been hit by reduced imports and tariff exemptions.
Economists say such shortfalls are constraining fiscal space, forcing the government to curb spending even as inflationary pressures remain high.
Policy Exchange Bangladesh Chairman Dr M Masrur Reaz told The Financial Express that the country's economic growth is projected to stay below 5.0 per cent, which will inevitably weigh on revenue collection.
"If economic growth is lower, the revenue base will also shrink, leaving limited fiscal space," he said.
He noted that as the government pursues its fiscal rationalisation drive, borrowing capacity in both domestic and external sectors will remain limited, making it essential to maintain spending strictly within potential revenue and debt limits.
FOCUS SHIFTS TO CRITICAL SECTORS, REFORMS
The finance ministry has instructed that only critical sectors - such as health, agriculture, education, and social safety nets - will receive full funding priority. Discretionary spending, overseas travel, vehicle purchases, and non-essential development activities will be curtailed as part of cost-cutting measures.
Dr Reaz welcomed the ministry's decision not to divert unspent ADP funds to the revenue budget, calling it a prudent move.
"The development budget is already constrained; if ministries can save, those funds should be redirected to other productive development projects," he said. On revenue reforms, he stressed that short-, medium-, and long-term measures must be implemented simultaneously.
"The government's focus has mostly been on long-term structural reforms, but short-term actions are also needed immediately to raise revenue," Dr Reaz said.
He added that debt management must align with the fiscal deficit, with borrowing focused on long-term concessional loans that yield higher economic returns. "Future annual development programmes should prioritise projects with measurable economic benefits."
According to the Implementation Monitoring and Evaluation Division (IMED), the Annual Development Programme (ADP) implementation rate stood at only 5.0 per cent - worth Tk 121 billion - during the first quarter (July-September) of the current fiscal year.
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