Revenue Gap, Banking Crisis Threaten FY27 Budget: Experts

The Finance Minister is set to present the Tk 9.38 lakh crore national budget for Fiscal Year 2026–27 on June 11, at a time when policymakers face mounting fiscal pressures and structural weaknesses in the economy.

Experts warn that revenue shortfalls, a fragile banking sector, weak investment flows and external shocks are converging to create major challenges in financing the upcoming budget.

Severe Revenue Shortfall

The most immediate concern is the sharp decline in tax collection. Data cited by the Centre for Policy Dialogue (CPD) shows that the National Board of Revenue (NBR) fell short by Tk 1.04 lakh crore during the July–April period of FY2025–26.

Economists say achieving the annual target would now require unrealistic growth in the final months of the fiscal year.

With the revenue-to-GDP ratio remaining below 8 percent—among the lowest in Asia—the government continues to rely heavily on bank borrowing to finance the budget deficit.

Banking Sector Stress

Experts also point to deep vulnerabilities in the banking sector, where rising non-performing loans are limiting lending capacity.

Economist Dr. Zahid Hussain said the non-performing loan ratio has reached about 30.6 percent due to weak governance and repeated loan rescheduling. He warned that heavy government borrowing from banks is squeezing private sector credit.

By March 2026, domestic borrowing had already reached nearly 98.5 percent of the annual target, raising concerns of liquidity pressure in the financial system.

Weak Investment and External Pressures

Investor confidence remains subdued amid policy uncertainty, energy constraints and political transition. Foreign direct investment remains low, while private-sector credit growth has also declined.

Economists note that Bangladesh’s upcoming graduation from Least Developed Country (LDC) status in November 2026 could further strain export competitiveness, particularly in the ready-made garment sector.

At the same time, global energy price volatility continues to increase import costs. Higher LNG prices and subsidy pressures have forced the government to allocate billions of dollars in energy support, reducing fiscal space for development spending.

Rising Social and Economic Strain

Slower economic growth—estimated at around 3.9 percent—combined with inflation above 9 percent has weakened purchasing power and increased poverty levels.

The poverty rate has risen to about 21.4 percent, prompting expansion of social safety net programmes, including cash-transfer initiatives covering millions of households.

Call for Structural Reforms

World Bank Country Director Jean Pesme noted that Bangladesh’s resilience has supported growth in the past, but warned that without strong reforms in revenue collection and the banking sector, fiscal stability will remain under pressure.

As the budget announcement approaches, economists stress that the government must move beyond short-term borrowing solutions and focus on governance reforms, improved tax mobilisation, and financial sector restructuring to ensure long-term stability.