Big targets, weak capacity: Economists warn of implementation strain

Economists and researchers have said the proposed FY 2026-27 budget highlights a significant mismatch between the current fiscal year's economic reality, the government's ambitious targets, and the country's limited implementation capacity.

They said projected targets for GDP growth, inflation control, revenue collection, foreign investment and budget deficit management are not fully aligned with present economic conditions.

The observations were shared at a national seminar titled "Proposed National Budget: From the Perspective of Development and Political Economy," held in the city today (17 June), organised by the Economic Reporters Forum (ERF). One Initiative Research and Development (OIRD) organised the seminar.

Economist and Associate Professor Zubair Ahmed of the Bangladesh Institute of Governance and Management (BIGM) presented the keynote paper.

He noted that although GDP growth stood at 4.14% in the current fiscal year, the upcoming budget has set a 6.5% target, which he described as overly ambitious and misaligned with prevailing economic reality.

He also pointed out structural constraints, saying export earnings remain 82% dependent on the ready-made garment sector, making diversification difficult. While foreign direct investment (FDI) is typically around 0.4–0.5% of GDP, the budget target has been set at 2.7%, which he termed unrealistic.

He further said the attempt to raise growth to 6.5% while reducing inflation from 8–10% to 7.5% appears contradictory. He warned that allocating Tk40,000 crore to the banking sector and increasing social safety net spending could add further pressure on the market. 

Despite long-standing gaps between National Board of Revenue (NBR) targets and actual collection, he said the new revenue targets also appear unrealistic.

Zubair Ahmed added that although allocations in some sectors of the Annual Development Programme (ADP) have been reduced, spending has increased in education, health and agriculture. He stressed aligning revenue targets with NBR capacity, ensuring sectoral balance, and strengthening oversight of public expenditure for stability.

Professor A K M Waresul Karim, Dean of the School of Business and Economics at North South University, said Bangladesh's budget has expanded more than 120 times over time but does not always reflect the country's actual economic capacity.

He said a larger budget does not necessarily mean a better one, as it increases pressure on borrowing, taxation and money supply to finance deficits. He also said a significant share of the budget is spent on administrative costs, limiting the effectiveness of social protection and development spending.

He further said combined direct and indirect taxes impose a tax burden of around 45–60% on the public, which may negatively affect investment and employment.

Mohammad Mizanur Rahman, executive director of the Centre for Strategic and Peace Studies, said Tk40,000-42,000 crore has been allocated to the defence sector, much of which is spent on salaries, allowances and administrative expenses, leaving limited scope for modern equipment procurement and creating capacity gaps.

He also expressed concern over agriculture, noting that only 5-6% of the national budget is allocated to the sector. He alleged that a large portion of agricultural subsidies goes to intermediaries rather than farmers.

Criticising the increase in the personal income tax exemption limit, he said inflation-adjusted relief for the public would remain limited, while changes in the tax structure could increase pressure on taxpayers.

Chapainawabganj-3 MP Md Nurul Islam Bulbul said the large budget deficit will increase reliance on borrowing, posing risks to the economy. He said achieving targets for revenue collection, inflation control, growth and investment would be difficult, citing weaknesses in the banking sector, absence of a clear employment plan.

AB Party General Secretary Barrister Mohammad Asaduzzaman Bhuiyan said budget implementation and accountability are more important than its size. He alleged that the lack of transparent evaluation of implementation creates scope for corruption and waste.