Strategic priorities of FY26 budget

The proposed national budget for the fiscal year 2025–26 (FY26) needs to outline key strategies and initiatives aimed at promoting sustainable growth, equity, and social welfare in Bangladesh. The primary objectives should include ensuring fiscal sustainability by balancing revenues and expenditures, enhancing social welfare and safety nets for vulnerable populations, and fostering collaboration between the government, private sector, non-governmental organisations (NGOs), and international agencies.

Key initiatives must include developing a detailed month-wise implementation plan for the Annual Development Plan (ADP) to effectively achieve social welfare goals. Curbing the informal hundi system by improving access to formal banking services and launching public awareness campaigns is crucial. Establishing clear budgetary guidelines for collaboration among government bodies, the private sector, NGOs, and foreign loan agencies would further support pro-poor initiatives.

Moreover, mechanisms should be introduced to recognise effective budget implementers, including performance-based awards, public acknowledgement, and financial incentives. Infrastructure development should also be prioritised to enhance international connectivity.

Bangladesh's economy faces several critical challenges that require immediate attention to ensure sustainable growth. A well-structured capital market is essential, as reliance solely on the stock market is insufficient. The capital market should include a range of financial instruments such as equities, bonds, options, Exchange-Traded Funds (ETFs), and foreign exchange tools, all requiring clear budgetary guidelines.

High inflation continues to pressure household finances and threatens macroeconomic stability, while escalating interest payments limit the government’s fiscal capacity to invest in development and social initiatives. The country's tax-to-GDP ratio remains among the lowest in Southeast Asia, constraining revenue mobilisation and impeding growth. Furthermore, heavy dependence on the ready-made garment (RMG) sector and imports underscores the urgent need for export diversification.

Addressing liquidity crises in banks is vital to restore financial stability. Employment generation, particularly in rural areas and urban slums, is imperative to provide opportunities for both educated and unskilled individuals. The quality of pharmaceuticals is often inadequate, and the low doctor-to-nurse ratio, combined with excessive fees in private hospitals, necessitates reforms to align with international standards and promote medical tourism. Infrastructure gaps and regulatory obstacles continue to hinder trade and investment.

Sustainability through investment in green and circular economies should be prioritised for long-term viability. Attracting foreign direct investment (FDI) remains challenging due to regulatory and political uncertainties. Expanding social safety nets is vital to protect vulnerable populations amid ongoing economic pressures. Improving seaport logistics, potentially with the assistance of the armed forces, could enhance trade efficiency. Addressing these interconnected challenges is essential to building a resilient and sustainable economic future for Bangladesh.

Many citizens, particularly in rural areas, continue to face limited access to information and resources, undermining tax compliance initiatives. Deep-rooted cultural attitudes towards taxation and mistrust in government institutions further weaken awareness efforts. To consolidate recent progress, sustained and ongoing efforts must be made to increase public understanding and compliance.

Awareness campaigns have successfully improved tax registration and compliance rates, especially among smaller enterprises. Citizens now possess a greater awareness of how tax revenues support public infrastructure and services. To strengthen this trend, the upcoming budget should incorporate targeted outreach initiatives for rural populations, involving local leaders to disseminate tax-related information.

Investment in digital platforms—such as online tutorials and mobile applications—can improve accessibility. Furthermore, tax incentives for timely payments, including rebates or public recognition schemes, could serve as effective motivators.

Expanding the tax base is essential to addressing the low tax-to-GDP ratio, particularly by simplifying registration processes for informal sector workers. Strengthening the training of tax officials will improve collection efficiency. The digitalisation of tax systems will streamline processes, reduce administrative costs, and increase transparency.

Financial inclusion for both rural and urban slum dwellers should be emphasised in the budget, alongside measures to reduce the cost of essential goods. Ongoing public awareness efforts are indispensable for educating citizens on the significance of tax contributions. Tax policies must be reviewed to close loopholes and ensure progressive taxation, promoting a more equitable system.

Enhancing compliance monitoring through data analytics can help identify instances of evasion. Encouraging the formalisation of small businesses with tailored incentives, while simplifying the tax code, would ease compliance. Partnering with NGOs and the private sector can effectively reach underserved communities and promote tax registration.

Launching transparency initiatives to clearly communicate how tax revenues are utilised would help build trust in state institutions. Cultural sensitisation programmes should address negative attitudes towards taxation by engaging respected community leaders to reshape perceptions.

Enhanced training for tax officials would enable them to better assist taxpayers, while the establishment of citizen feedback mechanisms would allow for continuous improvement. By implementing these strategies, the government could foster improved tax compliance and public engagement, contributing to a more stable and robust fiscal environment.

To ensure a pro-poor national budget, a multifaceted approach is required. The budget should prioritise initiatives that directly benefit disadvantaged populations, including phased outreach programmes and expanded digital access. Cross-sector collaboration with NGOs and the private sector would maximise the impact of allocated funds.

Performance-based funding should be directed to initiatives with measurable social outcomes, and dedicated budget lines should support monitoring and evaluation activities. Community engagement efforts should be strengthened by empowering local leaders to act as facilitators. Investment in technological infrastructure could streamline administrative processes, while the training of tax and community officials would improve service delivery and transparency.

The national budget for FY26 must articulate a comprehensive economic strategy to foster inclusive growth, equity, and social justice. It should incorporate structural reforms and policy measures targeting the informal economy. Key measures might include money-whitening schemes supported by fiscal incentives and streamlined procedures to integrate undeclared funds into the formal economy. Public recognition of participants through certificates or media coverage would help normalise participation and improve reputational standing.

Strategies to reduce reliance on the hundi system should focus on expanding access to formal banking and improving digital banking infrastructure. A detailed month-wise ADP implementation schedule, with coordinated efforts across the government, private sector, NGOs, and international partners, should support pro-poor programming.

Strong legal enforcement against loan defaulters is essential. Drawing inspiration from South Africa’s Truth and Reconciliation Commission, Bangladesh should consider establishing a similar framework to confront historical injustices and facilitate national healing. Recognising that no part of society was untouched by past abuses is essential to any future reconciliation process, and such efforts must be supported by clear budgetary guidelines.

Effective budget implementation must be recognised through structured mechanisms such as awards, public acknowledgements, and certification schemes. Establishing feedback loops and performance metrics will aid continuous improvement. By centring the budget on such inclusive and accountable measures, the government can create an enabling environment for economic resilience and social justice.

In the realm of social welfare, welfare economics evaluates how resources are allocated and how policies can improve societal wellbeing. Core principles include Pareto efficiency, social welfare functions, and income redistribution. To ensure accountability and effectiveness, the proposed national budget should incorporate Key Performance Indicators (KPIs), including Budget Utilisation Rate (measuring the proportion of funds expended within a timeframe), Timeliness of Expenditure (tracking schedule adherence), and Revenue Collection Efficiency (assessing actual vs projected revenue).

Other important indicators include the Percentage of Programmes Achieving Targets, Cost Variance (highlighting budget discrepancies), and the Stakeholder Satisfaction Index. Audit findings should evaluate the quality of financial reporting, while impact assessments should measure improvements in poverty, employment, and other key social metrics. KPIs should also cover the outcomes of training and capacity-building initiatives, and compliance with transparency and reporting standards.

The budget should aim to reduce inflation, generate employment, improve sectoral efficiency, boost GDP, and enhance inclusivity. Entrepreneurship development must be prioritised, especially through vocational education and Technical and Vocational Education and Training (TVET). Reopening Cumilla Airport could reduce pressure on Dhaka and improve regional and international connectivity.

The concept of societal banking, as advanced by Ali—transforming micro-savings into micro-investments—should be implemented. Furthermore, developing Cox’s Bazar into an international tourist hub could strengthen the regional economy and benefit the adjacent hill districts.

The National Budget for FY26 has the potential to foster a more inclusive, resilient, and sustainable economic environment, promoting broad-based growth and social justice for all citizens.

- Prof Dr Muhammad Mahboob Ali, a postdoc, is a macro and financial economist currently working as a Professor of Economics, Bangladesh University of Business and Technology. He can be reached by email: pipulbd@gmail.com