The national budget for the 2025-26 financial year will accommodate major recommendations made by a task force on economy to tame inflation and expand the social safety net by bringing about major changes in the public spending and resource mobilisation, said finance ministry officials.
The interim government formed the task force as part of its efforts to bring the country鈥檚 economy back on track after the autocratic Awami League regime, which was ousted in a mass uprising on August 5 past year, sent the economy into tailspin, they said.
The task force on January 30 submitted its report titled 鈥楻e-strategising the economy and mobilising resources for equitable and sustainable development鈥� with a host of recommendations on the national budget which suffered immensely due to corruption, inefficiency and wastage of resources during the Awami League regime.
The finance ministry officials said that directives had already been given to all ministries and divisions through a circular to follow the basic principles and task force鈥檚 recommendations to set up the projections on resource mobilisation and expenditure.
The other principles include poverty reduction, human resource development, mitigating the climate change, maximum uses of resources and keeping balance between the growth in gross domestic product and the overall budget outlay, they said.
Centre for Policy Dialogue executive director Fahmida Khatun termed the Finance Division鈥檚 moves positive against the backdrop of the shortage of resources because of a chronic revenue shortfall.
Things are moving towards right directions, said the CPD executive director, also a member of the task force, referring to recent reports that the interim聽 government is likely to announce a downsized outlay of Tk 7.9 lakh crore for the FY26 to reduce dependency on borrowing to meet budget deficit.
The AL regime in its last budget had announced a Tk 7.97 lakh crore budget for FY25, but the interim government revised down it to Tk聽7.4 lakh crore, slashing the annual development programme to Tk聽2.16 lakh crore from initial Tk聽2.65 lakh crore.
One of the major recommendations of the task force led by former Bangladesh Institute of Development Studies director general KAS Murshid was the maintaining of fiscal discipline.
鈥楾he fiscal policy must be aligned with the monetary policy to manage expectations about inflation. If the government runs large fiscal deficits and borrows excessively, the situation can lead to higher inflation expectations, as people fear that an excessive money supply growth will drive up prices,鈥� according to the report by the task force.
Former World Bank Dhaka office chief economist Zahid Hussain termed the task force recommendation correct since the expansionary fiscal measures by the immediate past political regime made the contractionary monetary policy ineffective.
High inflation has become entrenched in recent years, he said.
The annual average inflation is expected to accelerate to 10.2 per cent in FY25, from 9.7 per cent in FY24 and 9 per cent in FY23, said the Asian Development Bank in its recent outlook regarding Bangladesh.
To offset inflationary pressure on majority of the people, the task force recommended prioritising poverty reduction-focused programmes such as old-age allowances, disability benefits, mother and child benefit schemes, and food security interventions targeting poor and vulnerable groups.
Terming the social protection allocations inflated because of the presence of pension for retired government employees and their families, savings certificate interest assistance and procurement of equipment for search, rescue operation and emergency communication for earthquake and other disasters among the list of 24 in the funds, the task force called for maintaining international standard to operate social security programme.
The Finance Division set side 2.5 per cent of the GDP and 17 per cent of the national budget on social protection spending in the national budget for FY25.
However, when the programmes under the list are excluded, the allocation drops to only 1.2 per cent of the GDP and 7 per cent of the budget, said the report.
The World Social Protection Report 2024鈥�26, published by the International Labour Organisation estimated that Bangladesh spent just 0.9 per cent of its GDP on social protection, which is markedly below the South Asian regional average of 3.8 per cent as well as the averages of 4.2 per cent and 8.5 per cent for lower-middle-income and upper-middle-income countries respectively.
The task force focused on the annual development programme, saying that the policy priority for the government would be to set its size at a manageable level and seriously address the capacity constraints and inter-agency and aid coordination problems.
It also suggested the separation of tax policy and operational services of the National Board of Revenue, automation of the collection system of taxes and levies, abolishing zoning system and capacity building of the NBR among the resource mobilising steps.
The country鈥檚 tax revenue as a percentage of the GDP has been declining, hitting 8.6 per cent in 2022-23, the lowest in South Asia. The low tax-GDP base has been concerning as the resource shortfall prevented the successive governments from higher spending on important sectors like education, health and social safety net.
The introduction of bonds in the future has also been suggested by the task force to meet the financing with the country鈥檚 graduation from the least developed countries鈥� bloc in 2026.
Fahmida said that some of the recommendations should be implemented on the short-term basis while the others on the mid- and long-term basis.
