Budget to set 10 priorities

Facing inflation fatigue and fiscal strain, Bangladesh's interim government is betting on discipline over expansion in a new budget built around 10 priorities to stabilise the economy.

To be unveiled tomorrow, the budget gives top billing to inflation control, with a target of 6.5 percent in the fiscal year beginning July 1. That restraint is matched by a modest growth projection of 5.5 percent, reflecting a shift away from the expansionary stance of recent years as the government responds to prolonged economic pressures and warnings of rising poverty from global organisations.

This time, the budget steers clear of ambitious promises and outsized projections. In contrast to past years, the overall size of the budget will be slightly smaller -- Tk 7,90,000 crore, down 0.87 percent from the current fiscal year. The development budget will be reduced by Tk 35,000 crore to Tk 2,30,000 crore, while the revenue budget will go up by Tk 28,000 crore to Tk 5,60,000 crore.

Fiscal policy will prioritise tighter coordination with monetary policy, and the budget is expected to reflect recommendations from key reform commissions and task force reports. Crucially, securing external budgetary support, particularly from the International Monetary Fund, will hinge on the government's willingness to meet conditions, including a lower deficit, better subsidy targeting and more transparency.

A large chunk, 57 percent, of the revenue budget is earmarked for salaries, subsidies, incentives, and debt servicing. Allowances and salaries alone are expected to reach Tk 82,000 crore. The budget may also introduce dearness allowances of 10 to 20 percent for government employees, adding further to recurring costs.

Subsidy expenditure, led by electricity and fertiliser, is projected to hit Tk 1,16,000 crore, inflated by rising arrears. Officials say the government will use the budget to outline a gradual subsidy reduction plan in line with IMF advice. Meanwhile, interest payments will account for around 22 percent of the revenue budget, a burden the government aims to reduce in phases.

To ease fiscal pressure, the government will lean more on foreign loans, especially for budget support, given their longer repayment periods -- typically 20 to 30 years -- compared to five years for domestic loans.

Still, limited fiscal space means large increases in spending on health, education, or social protection are unlikely. Even so, those sectors remain among the 10 priority areas, with the budget expected to protect core social programmes, including food subsidies for low-income groups.

Of the 58 ministries and divisions, the top 10 are expected to receive Tk 2,96,000 crore, roughly 38 percent of the total outlay. The largest share will go to the Secondary and Higher Education Division. The Local Government Division, which previously topped the list, will see a reduced allocation this year.

Allocations for defence, primary and mass education, power, and social welfare may see marginal reductions. Health services and public security are set for modest increases, while allocations to agriculture and road transport are likely to remain flat.

Officials say the budget will take a conservative approach to revenue targets, aiming to collect Tk 5,64,000 crore, up 4.25 percent from the original target and 8.8 percent from the revised estimate. The National Board of Revenue's goal has been set at Tk 4,99,000 crore, marking a 3.95 percent rise from the original figure and 7.65 percent above the revised target. The numbers reflect cautious optimism amid weak collection performance this year.

To boost collections, the government is rolling out several tax reforms. These include curbing exemptions, introducing a uniform VAT rate of 15 percent, and widening the digital net for tax filings. A medium- and long-term revenue strategy is also on the cards to modernise the system.

Among the proposals are an electronic platform for tax deduction at source and tighter VAT registration rules. Businesses with annual turnover above Tk 50 lakh will now be eligible for enlistment, down from the previous Tk 3 crore threshold, as part of an effort to broaden the tax base.