As Bangladesh approaches the fiscal year (FY) 2025-26, the country stands at a critical juncture. The interim government is set to unveil a new national budget, which is expected to reflect both the pressing need for economic stabilisation and structural reform. With the economy grappling with high inflation, low revenue mobilisation, rising unemployment, persistent inequality, and the impending graduation from Least Developed Country (LDC) status, the upcoming budget is poised to address these multifaceted challenges.
The formulation of the FY2025-26 budget occurs against a backdrop of significant economic and political upheaval. The ousting of the previous government in August 2024, following mass protests, led to the establishment of an interim administration on August 5, 2025, tasked with steering the country through turbulent times.
This is reflected in the World Bank’s revised economic growth forecast for Bangladesh which dropped to 3.3 percent growth of Gross Domestic Product (GDP) for FY2024-25, marking the lowest rate in 36 years. This reduction is attributed to high inflation, reduced investment, a weak financial sector, and political instability. As of April 2025, the point-to-point inflation rate stood at 9.17 percent, with a 12-month average of 10.21 percent. Although this reflects a decline from last month’s 9.35 percent (point-to-point) and 10.26 percent (12-month average) respectively, inflation is still high, persisting for almost three years now. To combat inflation, the central bank has maintained a tight monetary policy, keeping the policy rate at 10 percent. These economic challenges are compounded by the upcoming graduation from LDC status in 2026, which will result in the loss of various flexibilities, including the loss of preferential market access for Bangladeshi products in developed and some developing country markets and access to finance at flexible terms.
