Budget based on unrealistic assumptions, implementation will be challenging: CPD

The proposed national budget for FY2026-27 is based on overly ambitious assumptions and is likely to face significant implementation challenges amid persistent economic pressures, the Centre for Policy Dialogue (CPD) said at its post-budget review today (12 June).

Speaking at the discussion, CPD Distinguished Fellow Mustafizur Rahman said the budget's assumptions on inflation, economic growth, investment, and revenue mobilisation do not adequately reflect prevailing economic realities.

"The assumptions underpinning the budget are highly ambitious. Given the current economic situation, implementation will be challenging," he said.

Inflation target may be difficult to achieve

CPD Executive Director Fahmida Khatun questioned the government's target of reducing inflation to 7.5% in the next fiscal year, saying the goal would be difficult to achieve under existing conditions.

"Bringing inflation down to 7.5% will require not only adequate food and energy supplies but also an effective and realistic monetary policy. A contractionary monetary policy may need to continue for some time," she said.

She warned that higher government spending could further fuel inflation if it does not translate into productivity gains, employment generation, and increased investment.

"This is a large budget, and government expenditure will increase. If spending does not enhance productivity, it could add to inflationary pressures," she said.

According to CPD, inflation in Bangladesh remains largely supply-driven and cannot be controlled through monetary tightening alone. The think tank said improving food availability, ensuring stable energy supplies, and strengthening supply chains would be critical to easing price pressures.

The organisation also questioned the government's inflation projections. Average inflation stood at 8.6% on a 12-month moving average basis through May, while point-to-point inflation was 9.4%, indicating that price pressures remain elevated.

Economy still faces multiple challenges

Presenting CPD's assessment, Fahmida said the budget had been formulated at a time when the economy continues to grapple with several challenges, including prolonged high inflation, weak private investment, slow employment growth, revenue shortfalls, and vulnerabilities in the banking sector.

Although foreign exchange reserves have improved due to stronger remittance inflows, she noted that uncertainties surrounding energy supplies and global fuel prices continue to pose risks.

"The economy remains at a critical juncture despite some positive developments in the external sector," she said.

Growth and investment projections questioned

The CPD also expressed reservations about the government's economic growth target.

The budget projects GDP growth of 6.5% in FY2026-27, compared with a provisional estimate of 5% for the current fiscal year. However, official statistics indicate that growth has remained slightly above 4%, raising questions about the feasibility of the target.

The think tank also described private investment projections as optimistic. The budget expects private investment to rise to 21.3% of GDP next fiscal year from a revised estimate of 21.2% this year, despite prolonged weakness in investor confidence.

CPD further questioned the government's expectation of 9.4% growth in private-sector credit, noting that credit growth stood at only 4.75% in April.

The organisation stressed that restoring business confidence would be essential for achieving both higher economic growth and lower inflation in the coming fiscal year.