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This year has been quite turbulent, with the global economy facing headwinds from both geopolitical conflicts and trade wars. Developing economies like Bangladesh have borne the brunt of supply chain disruptions, inflationary pressures, and slowing economic activity. According to the World Bank Group, Bangladesh’s GDP growth is expected to remain close to 4%, while the IMF projects growth at around 4.7%. Inflation has also hovered around the 10% mark, as rising energy and food prices have continued to fuel cost-push inflation.
Against this backdrop, the Government of Bangladesh has targeted a GDP growth rate of 6.5% in the FY2026–27 budget, banking on a rebound in private investment, greater financial sector stability, and stronger export performance. The key to this transformation remains attracting investment, both domestic and foreign. This is easier said than done.
Improving the ease of doing business requires a systemic shift, including easier access to capital, less bureaucratic red tape, a stable and predictable policy environment, reliable utility services, better infrastructure, and continued preferential market access as Bangladesh prepares for LDC graduation, now expected in 2029.
The proposed budget, with a total outlay of BDT 9,38,000 crore, is ambitious. Around BDT 3,00,000 crore, or 32% of the budget, has been allocated to the Annual Development Programme (ADP). The National Board of Revenue (NBR) has been tasked with collecting BDT 6,04,000 crore, an 18% increase over last year’s target. The budget deficit stands at BDT 2,43,000 crore, or 3.6% of GDP, with the banking sector expected to finance BDT 1,12,000 crore of the deficit. As we witnessed last year, heavy reliance on bank borrowing could once again crowd out private sector credit. Banking sector experts attribute the subdued private sector credit growth of around 6.5% to weak investor confidence and banks’ growing preference for investing in relatively safer government securities rather than extending loans to the private sector.
This year’s budget rests on two broad pillars: welfare and investment, as the country navigates an important phase of economic transition. As the first democratically elected government following last year’s political upheaval, the administration has placed considerable emphasis on reinforcing its pro-people credentials. Social safety net allocations have increased by 14% to BDT 1,44,338 crore, largely driven by higher allocations for Government-to-Person (G2P) payments and the expansion of family and farmer card programmes.
The government has also increased allocations for healthcare and education. Healthcare spending has nearly doubled to BDT 69,409 crore, equivalent to around 1.02% of GDP. Education has been allocated BDT 1,04,000 crore, alongside a commitment to gradually raise spending to 5% of GDP over the next five years. These are welcome moves. As Bangladesh prepares for its next phase of development, investments in education, healthcare, and skills development will be critical to fully harnessing the country’s demographic dividend.
As promised, the government has also introduced measures to improve the ease of doing business by reducing the number of steps required to set up a company. Corporate taxes have been streamlined, and the government has committed to maintaining policy continuity over the next five years, giving investors greater confidence to make medium- and long-term investment decisions.
The budget identifies ICT, electric vehicles (EVs), electronics, renewable energy, and semiconductors as future growth sectors, signaling the government’s intention to diversify the economy beyond apparel manufacturing. If implemented well, these sectors could become important drivers of Bangladesh’s next phase of industrialization.
The budget has also allocated resources to accelerate the country’s green transition across both industry and the power sector. This will encourage greater adoption of renewable energy, improve resource efficiency, and reduce industrial energy consumption. These investments are becoming increasingly important, not only from an environmental standpoint but also to maintain Bangladesh’s competitiveness in export markets, particularly the European Union, where sustainability-related regulations are expected to become more stringent from 2028 onward.
While the government appears to have taken several steps in the right direction, the real test will be implementation. Questions remain about the administration’s ability to deliver these programmes on time while minimising leakages and improving public sector efficiency. The revenue target also appears ambitious, given the current growth trajectory. Ultimately, reviving private investment—particularly by supporting SMEs alongside large-scale industries—will be essential to generating employment, stimulating economic activity, and helping the government achieve its fiscal and revenue objectives.
This article was authored by Zahedul Amin, Co-founder and Managing Director at LightCastle Partners. For further clarification, please contact: [email protected].
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