The budget aims at raising the revenue-to-gross domestic product (GDP) ratio to 10.2 per cent from about 8 per cent in FY26. This would be the highest since 1993.
Bangladesh’s FY27 budget revenue targets look challenging to achieve in light of weak record on tax mobilisation and reform implementation, Fitch Ratings said.
Revenue execution is the main fiscal test as the budget targets nominal revenue growth of 18 per cent YoY while also proposing a 19-per cent rise in spending, it noted.
Energy measures could support medium-term growth if implementation improves.
“Revenue execution is the main fiscal test, because the budget targets nominal revenue growth of 18 per cent year on year while also proposing a 19-per cent rise in spending,” Fitch noted in a press release.
Bangladesh’s history of expenditure undershooting may still help to contain the deficit if budget execution lags again, it noted.
Energy measures could support medium-term growth if implementation improves. More than 40 per cent of Bangladesh’s electricity generation capacity is gas-based, and the budget prioritises domestic gas exploration; efficiency gains in generation, transmission and distribution; and stronger infrastructure for liquefied natural gas supply.
Bangladesh has requested a new programme from the International Monetary Fund (IMF), while the final review of the current arrangement expiring in January 2027 seems out of reach, but agreement on the reform agenda may take time, leaving the credit implications of the FY27 budget dependent mainly on whether the government can deliver stronger revenue mobilisation and investment execution than in the past, said Fitch Ratings.
The growth target also looks ambitious, which adds to the risk around the budget’s assumptions. The authorities expect real GDP growth of 6.5 per cent in FY27, but Fitch forecasts 3.5 per cent, reflecting a banking sector which is still fragile, weak private-sector credit growth, policy framework shortcomings, and an uncertain external environment, that continue to weigh on investment.
Fitch’s FY27 fiscal deficit forecast for the country is unchanged at 3.6 per cent of GDP, in line with the authorities’ target, but this reflects its expectation of both lower revenue and lower expenditure than in the budget.
Medium-term revenue and growth gains will depend on whether the government can implement its reform agenda more effectively than in the past, added the release.
Fibre2Fashion News Desk (DS)
