The national budget for Bangladesh for fiscal year 2026–27 has recently been announced. Since its presentation, public discussion has centered on where the financing required for the budget will come from, how much scope there is for expenditure restraint, and how the obstacles to implementing the proposed budgetary initiatives can be overcome.
Meanwhile, more than 100 days have passed since the current government assumed office. From a geopolitical perspective, the government is confronting a range of global economic challenges, while at the same time having to address numerous domestic economic problems. Against this backdrop, a pertinent question arises: What should Bangladesh's course of action be in the period ahead?
In the post-budget period, the government needs to focus on three key areas. The first is undertaking the necessary reforms in revenue generation. This will require not only increasing the tax-to-GDP ratio but also broadening the tax net and expanding the tax base. Bangladesh currently relies more heavily on indirect taxes than on direct taxes. As a result, the tax burden falls disproportionately on ordinary citizens, while government revenue also becomes more vulnerable to global economic shocks. Bangladesh's economy must shift toward greater reliance on direct taxation. At the same time, the efficiency of tax collection must be improved. In this regard, a proposal had been made to split the National Board of Revenue into two entities—one responsible for tax policy and the other for the operational aspects of tax collection. That reform has yet to be implemented.
The second priority is reforming the structure and process of public expenditure. Given the significant constraints on financing government spending in the current fiscal year, the government must establish clear spending priorities. Both in implementing its electoral commitments and in selecting development projects, it must make objective decisions about which initiatives deserve precedence. Projects that are indispensable or that directly contribute to productive economic activity should receive priority. Large-scale and prestige projects should, for the time being, be deferred. Rather than political considerations, economic realities should determine the government's future initiatives.
Third, reforms are also needed in the implementation process to ensure the swift execution of the initiatives proposed in the budget. Traditionally, government programs and projects in Bangladesh have faced numerous obstacles—some stemming from legal complications, others from excessive procedural formalities, and still others from cumbersome bureaucratic layers. As a consequence, the implementation of programs and projects is often prolonged and delayed, while these obstacles also create opportunities for corruption. Reforming each of these areas should be one of the government's top priorities.
In the post-budget period, the government must pay attention to three categories of challenges: ongoing problems, deepening problems, and emerging problems. Bangladesh's ongoing challenges include poverty and deprivation, economic slowdown, unemployment, inflation, and inadequate investment. Poverty has reportedly increased in recent times, and an estimated 36 million people are now living below the extreme poverty line. Bangladesh's current economic growth rate stands at just over 3 percent. Both the agricultural and industrial sectors are experiencing sluggish growth. According to official figures, around 3 million people in the country are unemployed. Inflation has remained persistently high for quite some time, with no sign of easing. At present, both domestic and foreign investment are also showing signs of stagnation.
In the years ahead, the government should pursue an inclusive, pro-poor growth strategy. At its core should be employment-led growth. To achieve this, greater emphasis must be placed on the agricultural sector. Human resource development is indispensable for achieving higher economic growth. This will require increased investment in education and healthcare, along with policies centered on human development. Bringing inflation under control will require not only structural reforms in the market system but also the creation of strategic reserves of essential commodities. In terms of investment, incentive-based economic policies alone will not be sufficient. They must be accompanied by reforms to the overall investment climate, including improvements in structural conditions, the political environment, law and order, and the assurance of security.
Among the deepening challenges are inequality and disparity, the crisis in the financial sector, the burden of external debt and subsidies, violence against women, and environmental degradation. Inequality has become a profound problem in Bangladesh today, with the wealthiest 10 percent of the population owning three-fifths of the country's wealth, while the richest 1 percent controls one-quarter of its total assets. The volume of non-performing loans in Bangladesh's economy has reached nearly Tk 6 trillion. Thousands of crores of taka have been illicitly transferred abroad. Bangladesh's current external debt stands at US$110 billion. In the last fiscal year, the government provided Tk 109,000 crore in subsidies across various sectors. Violence against women has reached a toxic level. It not only obstructs women's economic empowerment but also threatens their very existence. Climate change and environmental pollution are not merely environmental crises; they are also development challenges.
There is no alternative to economic democratization if inequality and disparity are to be reduced. This is because inequality exists not only in outcomes but also in opportunities. Therefore, removing structural controls over the economy alone is not enough; it is equally essential to ensure that poorer segments of the population have access to both resources and opportunities. Establishing economic discipline in the financial sector, along with a visible and accountable governance framework, is imperative. In addressing non-performing loans, a combination of measures—including legal action and loan restructuring—can be adopted. With regard to external debt, Bangladesh may engage in discussions with international financial institutions on restructuring its debt repayment framework while also exploring opportunities to raise financing from international capital markets.
Government subsidies across different sectors should be reviewed and rationalized. A phased roadmap for gradually reducing subsidies should then be developed. At the same time, efficiency and productivity must be improved across various sectors so that the need for subsidies is progressively reduced. The state's role is indispensable in ensuring gender equality and the empowerment of women in every sphere. Achieving this requires not only the government's commitment and prioritization but also effective public policies, proper enforcement of laws, and partnership with families and society. Under no circumstances should violence against women be tolerated. A sustainable development strategy that integrates economic growth with environmental protection demands the government's firm commitment and priority. Existing effective plans in this regard must be implemented without delay.
Among the emerging challenges are wars and conflicts resulting from shifts in global geopolitics, the international political crisis, and the spread of "economic nationalism." As Bangladesh is part of the global economic system, the war in Ukraine, the COVID-19 pandemic, and the recent crisis in the Middle East have adversely affected the country's energy situation, import and export trends, overseas employment and workers' remittances, the exchange rate of the Bangladeshi currency, and foreign exchange reserves. At the same time, the rise of economic nationalism has prompted major powers and much of the developed world to adopt more inward-looking economic policies. This may create difficulties for Bangladesh in securing grants, concessional loans, and trade preferences. Instead of relying on multilateralism, developed countries are increasingly favoring bilateral relationships with developing countries such as Bangladesh. As a result, these countries are being deprived of many of the benefits associated with multilateral cooperation.
To address these challenges, the government must adopt forward-looking and proactive policies. In the energy sector, for example, Bangladesh could build strategic reserves, diversify its sources of energy imports, expand the use of alternative energy sources, and improve energy efficiency. Likewise, in response to the rise of economic nationalism, Bangladesh may consider forming regional alliances with other developing countries to strengthen trade and economic cooperation with the developed world.
Another emerging issue is Bangladesh's graduation from the category of Least Developed Countries (LDCs) to that of developing countries. Bangladesh has applied to the United Nations for a three-year postponement of this transition, and a decision is expected next month. If the application is approved, Bangladesh must use the additional three years to strengthen its capacity and capabilities in various areas so that no further obstacles remain to the graduation process. This requires careful preparation. At the same time, it should be remembered that once Bangladesh graduates to developing-country status, it will lose a number of benefits under the global economic system, including grants, low-interest loans, and preferential tariff treatment. Therefore, preparations are also needed for the post-graduation period. Bangladesh has already formulated a strategic framework for its transition from LDC status to that of a developing country. That strategy now needs to be implemented effectively and in phases. In light of the revised timeline resulting from the requested postponement, a clear roadmap can also be developed.
Finally, let me conclude by saying that Bangladesh will face numerous challenges in the years ahead, arising from both global and domestic factors. These challenges are complex, but they are not insurmountable. If the government confronts them with dedication, goodwill, integrity, and strong leadership, it will be possible to overcome them through collective effort.
Author: Economist
