How to Recognize a Good Budget?

Every year in June, we observe a ritual in Bangladesh. The Finance Minister presents the budget. Newspapers print special editions. Television channels run special programs through the night. In tea shops, office cafeterias, family dinner tables, the same questions come up everywhere. How big is the budget? Which goods get more expensive? Which get cheaper? Did taxes go up or down? How will my monthly expenses be affected?

These questions are not wrong. But if these are our only questions, we are not really reading the budget. We are checking a grocery bill.

A budget is a story. The story of where a country earns its money, where it spends, what it leaves behind for its citizens, and what it takes away from them. The numbers in a budget are not just numbers. Behind every number is a decision. Reading those decisions tells you whether a government is building a future, or just putting a bandage on yesterday's wound.

There are five ways to recognize a good budget. The size of the budget is not one of them. Let's go through each.

The five criteria, in brief:

• One, where is the money coming from? Domestic taxes, or borrowing?
• Two, is spending building the future, or servicing old debt?
• Three, how is the deficit being financed? Domestic loans, foreign loans, or printed money?
• Four, are the government and the central bank pulling in the same direction, or opposite?
• Five, who is the budget protecting? The poor and middle class, or those close to power?

The FY27 budget has been announced at Tk 9.38 lakh crore. The largest in the country's history. But this number is just the headline. The full story is buried inside. Let's go inside.

Let's start with a simple test. The monthly income of the family next door matters. But there's a more important question. Where does that income come from? Their own job, business, rent? Or do they borrow from a relative every month?

A family that runs on monthly borrowing cannot be called wealthy. They run on someone else's support. The same applies to a country. A good budget is one where most of the income comes from inside the country. Primarily from taxes. And from taxes collected fairly.

Bangladesh's Position: The Lowest in South Asia

Bangladesh's Tax-to-GDP ratio (the percentage of GDP that the government collects in taxes) stood at just 7.4% in 2026. That number is the lowest in South Asia. Among developing countries worldwide, it is near the bottom.

For comparison, India's Tax-to-GDP is around 17%. Vietnam's is close to 18%. Nepal's is 19%. Even Pakistan stands at 9.5%. So we are not just behind, we are behind every one of our neighbors.

What does this mean? A country that cannot collect enough taxes from its own citizens has to borrow from others. It has to listen to the IMF, World Bank, and ADB. It has to meet conditional reforms. In simple terms, it has to hand over the keys to its own house.

Who is Paying Tax: An Inverted Calculation

Collecting too little is one problem. But there's an even bigger problem. The little that is collected, who is it coming from?

According to NBR data from 2026, in Bangladesh, VAT (indirect tax) is 3.86% of GDP. Income tax is just 2.26% of GDP. The gap is nearly two-to-one. What is indirect tax? VAT, supplementary duty, customs duty. Everyone pays it, rich and poor alike. When you buy soap, when you recharge a SIM card, when you eat at a restaurant, everyone pays the same rate.

What is income tax? Tax on your annual income. The rich should pay more, the poor less. That's the natural rule. So in a country where indirect tax is double the income tax, what is actually happening? More from the pockets of the poor and middle class, less from the income of the rich. The tax structure itself is widening inequality.

NBR's own reports show that Bangladesh has about 1 crore registered taxpayers. But only about 40 lakh file returns. Among those, many declare zero income. The actual taxpayers are around 20 lakh people. In a country of 17 crore people, 20 lakh actual income-tax payers. About 1.2%. One of the lowest figures in the world.

In simple terms: Bangladesh's tax collection structure is weak on both sides. Total collection is low (Tax-to-GDP 7.4%), and what is collected comes largely from the pockets of the poor and middle class (VAT is double the income tax). On the first test of recognizing a good budget, we fail.

If 40% of your monthly salary goes to old credit card interest, can you build anything for the future? Your child's tuition, your own savings, home repairs, can you manage any of it? The same question applies to a country.

There are two kinds of spending in any budget. First, spending that builds the future. Second, spending that just runs today.

What kind of spending builds the future? New schools, hospitals, roads, power plants, water supply, research, technology, agricultural laboratories. These benefits we reap over 10 years, 20 years, 50 years.

What just runs today? Government salaries and allowances, pensions, various subsidies, and most importantly, interest on old debt. There is no avoiding these expenses, but spending on them does not build the future.

The Biggest Single Expense in FY27: Interest

According to Ministry of Finance documents for 2026, the FY27 total budget is Tk 9.38 lakh crore. The largest in our history. But within this budget, Tk 1.42 lakh crore goes just to interest. If you do the math, that's about 15.1% of the total budget.

What does this mean? Of every Tk 100 in the budget, Tk 15 goes to paying interest on old debt. Not new roads, not new schools, not new hospitals. Just the price of decisions made in previous years.

For comparison, the FY27 budget allocates Tk 94,700 crore to education and Tk 42,700 crore to health. So the entire education-plus-health allocation combined is less than the interest payment. The interest burden carries more weight than the schooling and healthcare of 17 crore people.

The Debt Trap

This is the debt trap. Borrow more to pay interest. Borrow more to pay the interest on that new borrowing. Over the past 5 years, total public debt has nearly doubled, from Tk 12 lakh crore to Tk 22 lakh crore. Debt-to-GDP now sits at about 40%. Researchers consider this close to the risk threshold for a developing country.

Let's clear up a misconception. Many think the core problem is the interest rate. Lower it, problem solved. But that's wrong. The interest rate is not the core problem. The core problem is the principal. The more debt grows, the more interest grows. The more interest grows, the more new borrowing is needed.

In simple terms: The single largest expense in FY27 is interest payment, exceeding the combined education and health allocations. As long as this pattern continues, the budget will pay for the past rather than build the future.

Almost every budget has a deficit. That's normal. Nearly every developing country in the world. The question is the size of the deficit, and how it is being financed.

FY27 projects a deficit of Tk 2.35 lakh crore. About 5.1% of GDP. The IMF recommendation is to keep this below 4.5%. So we have crossed the line.

There are three ways to finance this deficit. Each has its own price. Let's go through them.

Path 1: Borrowing from Domestic Banks

This is the most common route. The government issues bonds, the banks buy them. Cash comes to the government, bonds sit in the banks' portfolios.

What's the problem? The limited money the banks have, a big chunk goes to the government. As a result, businesses get less access to bank credit. Economists call this the crowding-out effect. The government stands at the front of the queue like a big brother, while everyone else waits behind.

Path 2: Foreign Borrowing

Loans from the IMF, World Bank, ADB, AIIB, and bilateral lenders like China, India, and Japan. Interest rates are typically low, around 1-3%. Attractive on paper.

But there is a hidden problem. These loans must be repaid in dollars. If the taka weakens, as it has from Tk 85 to Tk 122 per dollar over the past five years, the real debt burden grows. Someone who borrowed $1 million in 2020 at Tk 8.5 crore now has to repay Tk 12.2 crore. Just because of the currency, 43% more.

Path 3: Printing Money via the Central Bank

This is the most dangerous route. If Bangladesh Bank releases fresh currency into the market, it feeds directly into prices. Goods production hasn't grown, but money supply has. The result is inflation.

Inflation is a tax that doesn't need parliament's approval. The government does not announce it. The bank does not send a letter. Yet it takes money out of your pocket every month. You go to the bazaar and find 10% less goods for the same budget as last year. Economists call this the silent theft.

FY27's Split

Of FY27's Tk 2.35 lakh crore deficit, the Ministry of Finance plans about Tk 1.25 lakh crore from domestic sources, mostly banks. About Tk 1.10 lakh crore from foreign sources. Formally, there is no money-printing. But part of the domestic bank borrowing indirectly draws on the central bank's reserves.

The direct consequence? First, businesses are competing with the government for bank credit. Lending rates are currently 14-16%, nearly double the 2022 level. Anyone wanting to open a new factory simply cannot get a loan. If they can, at these rates a new venture is almost impossible to make profitable.

Second, the impact on private investment is direct. According to World Bank data, Bangladesh's private-investment-to-GDP ratio in 2026 sits at about 22%. The lowest in 15 years. Without investment, employment doesn't grow. Without employment, income doesn't grow. Without income, taxes cannot be raised. This cycle is the deep problem of Bangladesh's economy today.

In simple terms: The size of the deficit is not the biggest issue. The method of financing it is. FY27's heavy reliance on domestic bank borrowing has pushed private investment to a record low. The economy's most important engine is stalled.

This section is a bit harder. But this is Bangladesh's deepest problem today. Let's work through it step by step.

Picture a car. Two people in the front seats. One is pressing the accelerator, the other is hitting the brake. They want different things. What does the car do? It shudders forward, the engine burns out, the brakes wear down, and eventually it stops. But it never reaches the destination.

In an economy, these two are the government and the central bank. What is happening in Bangladesh today is exactly this car story.

Two Different Voices

What is Bangladesh Bank's position? Inflation needs to come down. For two years now inflation has been around 9-10%. The target is 6%. Far away. So the central bank says, raise interest rates, slow the flow of money, tighten credit. Slow the economy a little. Inflation will then come down.

What is the government's position? Development must continue. GDP growth must be maintained. Infrastructure projects must continue. So the government says, borrow from banks, increase spending, keep projects running. Speed up the economy.

These two positions are contradictory. One is hitting the brake, the other is pressing the accelerator.

The Math of the Policy Trap

What's the result? A cycle is born from which there is no clear exit. Economists call this a policy trap. Let's work through it step by step.

Step 1: The central bank raises interest rates (in 2024 the repo rate was 7%, by 2026 it has risen to 10%).

Step 2: The interest the banks charge the government on its loans also rises. Because the banks are now taking deposits at higher rates, they cannot lend to the government cheaply.

Step 3: The government's interest payments grow. FY24 was Tk 95,000 crore, FY27 is Tk 1.42 lakh crore. Roughly a 50% rise in just three years.

Step 4: To meet the higher interest costs, the government needs more borrowing. The deficit grows even bigger.

Step 5: To finance a bigger deficit, more bonds are issued. To sell these bonds, even higher interest is offered. Interest rates climb further.

Back to Step 1. The cycle continues.

Escaping the Trap

There are two paths out of this trap. Both are hard.

First path, cut government spending sharply. But this is politically almost impossible. Which projects get cancelled? Which subsidies get scrapped? Which employees get laid off? Every decision has political costs. No government finds this easy.

Second path, accept inflation. Pressure the central bank not to raise rates, perhaps even cut them. Then government interest costs come down, the deficit becomes manageable. But the cost of this path is paid by ordinary people, every day at the bazaar.

Most governments choose the second. Because inflation arrives slowly. At election time no one ties the blame to it directly. But raise VAT by 5% in the revenue bill, and you get protests in the streets. This political asymmetry is the deepest cause of Bangladesh's current policy trap.

In simple terms: A policy trap means a situation where the government and central bank work in opposite directions, and neither can stop. Bangladesh is in this trap in 2026. Rates are high, the government's interest payments are growing, the deficit is growing, new borrowing is needed. There is no easy way out.

Every budget is, at heart, a decision. Who do we protect, who do we leave behind? That decision is the true character of a budget. The numbers are just the expression.

Where do you look for that decision? In the subsidy allocation. Because subsidies mean the government is paying someone's bill on their behalf. On whose behalf? In the answer to this question, the character of the budget reveals itself.

FY27 Subsidy Allocation

According to Ministry of Finance documents, FY27's major subsidy allocations:

The first question that emerges from this table, where is the biggest subsidy? Electricity and energy, 41% of total subsidies. The second question, who benefits most from this subsidy? The answer is uncomfortable.

Who Gets What

A small family using monthly electricity gets, on average, Tk 200-400 in subsidy. Tk 2,500-5,000 a year. There are about 3.7 crore families in a country of 17 crore people. Total subsidy distributed this way is about Tk 20,000 crore. But total electricity subsidy is Tk 37,000 crore. Where does the remaining Tk 17,000 crore go?

The rest goes to big factories. Commercial and Industrial Premium electricity customers, large textile, cement, steel, glass, and chemical plants. A medium-sized textile mill burns Tk 3-5 crore of electricity a month. A large portion of that bill is government subsidy.

Similarly with the LNG subsidy. LNG imports primarily fuel electricity generation and heavy industry. Not household cooking. So this Tk 6,500 crore subsidy benefits not the housewife, but the industrialist.

Food assistance, the subsidy that goes directly to poor people's plates, is less than a quarter of the electricity subsidy. Tk 9,600 crore. Yet this is the only direct support for the poorest households. The budget's priorities show through clearly here.

Why This Pattern

The reason is an old problem of political economy. Pressure from a small but organized group is stronger than pressure from a large but unorganized population. Large factory owners are organized. They have chambers, lobbying capacity, political connections. The poor housewife is alone. She has no organization, no lobby. So in the subsidy battle, she loses every time.

This doesn't mean no industrial subsidies should exist. Some support is needed to grow production. But when industrial subsidies are four times the food assistance, the budget is no longer mass-oriented. It has tilted toward those closest to power.

In simple terms: On the question of who the budget is saving, FY27's character is uncomfortable. The biggest subsidy goes to big industry, direct support to the poor sits on the side. This is the pattern. A good budget would invert these numbers.

We have now walked through five criteria. Let's see the FY27 budget's report card all at once.

On none of the five criteria does FY27 deliver a good result. Ambitious in numbers, illusory in reality.

This is not to say there is nothing good about the budget. Women and children's development allocations have grown. A Tk 15,000 crore climate allocation is a new initiative. Some digital governance spending. But these are small positive moves, not enough to change the overall budget architecture.

Now let's flip the question. If we had to write a good budget, what would it look like? Fixing the five criteria alone isn't enough. Deeper structural reforms are needed. Let's walk through nine pillars that form the foundation of a truly good budget.

Pillar 1: Raising Tax-to-GDP from 7.4% to 12%

The first and most important. In five years, Tax-to-GDP must move from 7.4% to 12%. How? In three steps.

One, broadening the tax base. A country of 17 crore people has 20 lakh actual income-tax payers. That number can grow to 50 lakh. Anyone running a business, owning a flat or a car, traveling abroad, all of them should be brought under the tax net. Digital taxation (NID-linked tax cards) is the most effective tool.

Two, capital gains tax. On stock markets, real estate, crypto, all capital transactions. In India, capital gains tax brings in 0.6% of GDP. In Bangladesh, it is close to zero.

Three, wealth tax and inheritance tax. An annual 0.5-1% wealth tax on those holding more than Tk 10 crore in assets. A 15-20% tax on inheritance transfers. The US, UK, Germany, all major economies have these. Bangladesh has none.

Pillar 2: Cutting Interest Payments from 15% to 10%

Possible in only one way. Reduce new borrowing. Re-prioritize big projects. Suspend some, redesign others. A 10-year roadmap. Not possible in a single year. But the policy decision must be made today.

Alongside, restructure existing debt. Issue new bonds at today's 7% to retire older 12% bonds. A technical exercise, but capable of saving up to Tk 30,000 crore a year.

Pillar 3: Less Domestic Borrowing, More Foreign Concessional

Reducing reliance on bank credit will lift private investment. Cheap foreign concessional credit (Japanese, European, AIIB) can be expanded, with the dollar risk consciously hedged. Sukuk-style Islamic bonds can also raise capital from the Middle East.

Pillar 4: Government-Central Bank Coordination

The hardest one. Central bank independence must be preserved, but coordinated policy is also necessary. New Zealand's model is worth studying. There, the government and the central bank sign a joint 5-year agreement. Inflation and growth targets are set together. Each side's responsibilities are made clear.

For Bangladesh, one path forward is to set up a Fiscal Council. An independent body that oversees fiscal-monetary coordination. The Netherlands, Sweden, the UK all have one.

Pillar 5: Targeted Subsidies

End the one-size-fits-all subsidy regime. Move to targeted subsidies. Free electricity for poor households up to 50 units. Normal rate above that. Subsidized rate for middle-class families, but lower. Full commercial rate for large factories. The savings transferred directly to the poorest via cash transfer. The model works worldwide. India's Direct Benefit Transfer (DBT) is the largest example. 400 million people receive subsidies directly, not through consumer prices.

Pillar 6: Medium-Term Budget Framework

Break the one-year budget mindset. Bangladesh has had a Medium Term Budget Framework (MTBF) officially since 2006. On paper. In reality, each year's budget is prepared independently of the last. The three-year plan is just a list.

A good budget is an integrated three-year plan. Allocations for year one, projections for the next two. Before a project starts, all three years of funding are identified. The habit of pausing projects mid-stream can be broken. Germany, the UK, Australia all operate on this model.

Pillar 7: Performance-Based Budgeting

Each ministry should not just ask for money. They should also state what objective and what result they will deliver. The Ministry of Health asks for Tk 42,700 crore. What in return? How much will infant mortality fall? How much will immunization coverage rise? A measurable outcome behind every taka.

America's GPRA (Government Performance and Results Act) has been in effect since 1993. Every federal agency must file an annual performance report. Tied to budget approval.

Pillar 8: Climate-Responsive Budgeting

Bangladesh is one of the most climate-vulnerable countries in the world. Yet climate allocations in FY27 are only 1.6% of the total budget. A good budget would put this at 5-7%. Coastal embankments, sediment management, renewable energy, drought-resistant agriculture, all of these need front-loaded investment. If we get hit by climate, the recovery costs will be orders of magnitude higher.

Pillar 9: Citizen Budget Transparency

The budget is for the people, so the people should understand it. Bangladesh's budget documents run to 1,200 pages. No ordinary citizen can read them. What is needed is a 'Citizens' Budget', short, in plain language, in visual form. A 20-page document. Sent to every household. Brazil, South Africa, Indonesia have all done this. On the Open Budget Survey, Bangladesh scores 36 out of 100. South Africa scores 83.

In simple terms: A good budget doesn't mean a big number. It means nine pillars. Broadening the tax base, cutting interest cost, restructuring the deficit, government-central bank coordination, targeted subsidies, a medium-term framework, performance budgeting, climate responsiveness, and citizen transparency. The numbers come after. The architecture comes first.

Theory aside, who actually delivers good budgets? What numbers show their discipline? Let's look at some global examples. Each compared with Bangladesh.

Singapore: The Pinnacle of Discipline

Singapore became independent in 1965. At that point it was a small island with no natural resources, even water had to be brought in from neighboring Malaysia. Today its per-capita income is $82,000. 28 times Bangladesh's. How?

The main reason is budget discipline. In 2026 Singapore's Tax-to-GDP is 14%. Its budget has been in surplus almost continuously for 20-30 years. Debt is essentially zero (what little it has is borrowed from its own future pension reserves, no external debt at all). Government employees are among the world's best paid, but the headcount is small and corruption is almost nonexistent.

Most importantly, Singapore has a sovereign wealth fund, GIC (Government Investment Corporation), and another fund, Temasek Holdings. Combined assets of about $900 billion. That means there is roughly $150,000 in government savings behind every Singaporean citizen.

Compared to Bangladesh? We have no sovereign wealth fund. We have Tk 22 lakh crore of public debt. What Singapore has built from zero in 50 years, we have built in 50 years the exact opposite.

Norway: For Future Generations

Norway's Government Pension Fund Global (GPFG) holds $1.7 trillion in assets. The world's largest sovereign fund. How did it get so big? In the 1970s, when oil was discovered in the North Sea, Norway made a crucial decision. Nearly all oil revenue would go into a fund. Daily budgets would only use a portion of the fund's investment returns (a 3% cap).

The result? Even when Norway's oil runs out, generations to come will live off the returns of this fund. When oil ends, there will be no crisis as in other oil-dependent countries.

Compared to Bangladesh? We don't have natural resources to the same scale, but we have remittances. $25 billion a year. Over 50 years, that's more than $500 billion total. If just 10% of that had been put aside, our sovereign fund today would be $50 billion. But we spent it all and saved none.

Germany: The Constitutional Debt Brake

In 2009, Germany added a new clause to its constitution. It's called Schuldenbremse, the debt brake. The rule says the federal government's structural deficit cannot exceed 0.35% of GDP. In any year. Except for natural disasters or severe recessions.

Alongside this, Germany ran surplus budgets from 2014 to 2020. Brought debt-to-GDP down from 85% to 60%. The value of that discipline? When COVID struck, Germany had room to rescue the European economy. Because there was reserve in the vault.

Compared to Bangladesh? Our constitution has no such clause. There is no legal limit on the budget deficit. The government can run whatever deficit it wishes.

Vietnam: The Role Model for Developing Countries

Vietnam is much like Bangladesh. Population around 10 crore, geographic size similar. Reforms began in 1986 (the Doi Moi policy). At that time Vietnam's GDP was smaller than Bangladesh's.

Today Vietnam's per-capita income is $4,400. Bangladesh's is $2,700. About 60% higher. How? Budget discipline is a major reason. Vietnam's Tax-to-GDP is 18%. Deficit below 3.5% of GDP. Total debt is 37% of GDP, low and easily serviced.

Most importantly, Vietnam's infrastructure allocation runs at 6-7% of GDP. Bangladesh's is around 3%. Vietnam is building new ports, expressways, railways quickly. The result, exports are growing. Samsung, Intel, Apple, all are opening factories in Vietnam.

Compared to Bangladesh? Our taxes are lower, deficit higher, interest higher, infrastructure spending half. What Vietnam has done in 20 years, we have done less than half of in the same period.

South Korea: A Three-Decade Transformation

South Korea's story is more inspiring still. In the 1960s, South Korea was poorer than Bangladesh. Per-capita income $100, while Bangladesh's was $120. Today South Korea's per-capita income is $36,000. 13 times Bangladesh's.

How? Across three successive decades, the budget had specific priorities. In the 1960s-70s, education and infrastructure (the Park Chung-hee era). In the 1980s-90s, technology and heavy industry. After 2000, R&D and higher education.

Across every era, the largest budget allocation went to future-building sectors. Today, South Korea's R&D spend is 4.6% of GDP, the world's highest. Bangladesh's is around 0.6%.

Chile: The Latin American Exception

Latin America is generally infamous for budget crises. Argentina, Venezuela, Brazil all regularly slide into crisis. But Chile is the exception.

Since the 1980s, Chile has run a structural fiscal rule. The budget is built on the 10-year average copper price (Chile's main export), not the current price. If copper prices are high, the surplus goes into a stabilization fund. If low, the fund is drawn down.

The result? Chile has never had a budget crisis. Neighboring Argentina has had seven. In 2026, Chile's debt-to-GDP ratio is 36%, Argentina's 90%. For Bangladesh, Chile's model is worth imitating for a remittance-based stabilization fund.

The Price of a Bad Budget: Greece 2010, Sri Lanka 2022

There are good budget examples, but there are also lessons in bad budgets. Two recent ones.

Greece 2010. The euro gave Greece access to cheap foreign borrowing. The government used it to expand public-sector jobs, pensions, and subsidies. The budget deficit reached 15% of GDP. In 2010, credit rating agencies downgraded Greece. Interest rates jumped to 12% overnight. The country was bankrupt. A €260 billion EU-IMF bailout followed. The conditions? Cut pensions, cut salaries, raise taxes. A decade of austerity. Millions lost their jobs. The price of budget recklessness.

Sri Lanka 2022. More recent. In 2019, a new government announced major tax cuts. VAT from 15% to 8%, corporate tax from 28% to 24%. The result? Tax-to-GDP fell from 12% to 8%. Government revenue dropped 30%. Deficit grew to 12%. Unable to service foreign debt. May 2022 saw the first sovereign default in history. No fuel, no medicine, no food, for months. The president fled. The price of budget arrogance.

Looking at this table, a pattern is clear. Countries with higher Tax-to-GDP, lower deficits, and disciplined debt have higher per-capita incomes. Where the opposite is true, you find crises. Bangladesh is at the bottom of the table. To reach where Singapore, Norway, or Germany stand, the budget architecture has to change.

In simple terms: Good budgets are about discipline. Singapore is building wealth, Norway is saving for the future, Germany has bound itself with rules, Vietnam is building infrastructure, South Korea has transformed itself. Greece and Sri Lanka show the cost on the other side. Bangladesh has a choice today. Which list do we want to join?

Many think a budget is a technical document. Government officials draft it, economists analyze it, the general public has little stake. That view is wrong. Deeply wrong.

A budget is a country's fate document. Each year's budget determines the economic trajectory of the next 5-10 years. Let's look at five channels through which budgets directly change economies.

Channel 1: Investment Decisions

Why would a businessman open a new factory today? Many factors go into that decision. Demand, technology, labor, raw materials. But beneath all that lies one big question. Is the future stable?

If the budget signals that the government is responsible, debt discipline is good, and tax policy is predictable, the businessman invests. If the opposite, he waits. His money flows abroad. Or sits in gold and real estate, generating no new production in the economy.

Bangladesh's data proves this. During 2015-20, when budgets were comparatively better, private investment was at 27% of GDP. After 2021, deficits widened, debt climbed, and by FY27 private investment has fallen to 22%. A 5-percentage-point gap means Tk 2.3 lakh crore less investment each year. With that investment, about 15 lakh new jobs would have been created.

Channel 2: Inflation

Budgets and prices are directly linked. If the government borrows too much, pressure builds on the central bank, money must be effectively printed, and inflation rises. If the budget deficit stays low, the central bank can independently maintain price stability.

An example. Turkey. The Erdogan government ran massive deficits from 2020 to 2023. It pressured the central bank not to raise rates. The result? The Turkish lira fell from 7 to 35 against the dollar. Inflation hit 70%. People's savings evaporated.

Compared to Bangladesh? We are not on Turkey's path, but warning signs exist. Inflation at 9-10%, the taka has fallen from 85 to 122. The root cause of both is budget deficit. With a better budget, both numbers would be lower.

Channel 3: Credit Rating and Foreign Capital

Every country has a credit rating. Moody's, S&P, and Fitch, the three international agencies, assign them. This rating determines what interest rate the country pays on foreign borrowing. A good rating (A grade) means borrowing at 3-4%. A bad rating (B grade) means 8-10%. Junk grade means 15% or no borrowing at all.

How is this rating determined? The main inputs are budget discipline. Deficit, debt-to-GDP, tax collection. Bangladesh's rating in 2015 was Ba3 (on Moody's scale). By 2025 it had fallen to B1. Each downgrade adds about 1% interest on foreign borrowing per year. About Tk 5,000 crore extra annually.

Alongside this, FDI (Foreign Direct Investment) is rating-sensitive. A good rating means multinational companies will set up factories. A bad rating means they won't. Bangladesh's FDI in 2026 is just $1.4 billion. Vietnam received $24 billion. Roughly 17 times the gap. Because their budget discipline is better.

Channel 4: Generation-Changing Infrastructure

A good budget changes the face of a country in 10 years. How? Through major infrastructure.

Take China's story. In the 1980s, China's situation was no better than Bangladesh's. From the 1990s onward, China has invested 8-9% of GDP every year in infrastructure. High-speed rail, expressways, ports, airports, 5G, everything. Today's China is the fruit of those investments.

Bangladesh's infrastructure allocation is 2.5-3% of GDP. Vietnam's is 6-7%. Ethiopia's is 8%. We have built the Padma Bridge and some mega-projects, but there is no systematic long-term infrastructure investment. As a result, getting goods from a garment factory to Chattogram Port takes 3 days. In Vietnam, one day.

Channel 5: Social Stability

This is the hardest to measure, but perhaps the most important. A fair budget keeps society stable. An unfair one breeds instability.

Sri Lanka 2022. After the budget crisis, marches filled the streets, the president's residence was stormed, the president fled. In Argentina, budget crises have changed governments five times in 20 years. In Greece during 2010-15, protests filled the streets. Budget instability translates directly into political instability.

How did Bangladesh's political shift in July-August 2024 arrive? Not directly from a budget crisis, but economic pressure was a deep cause. Inflation at 11-12%, weak job creation, frustrated youth. All of these traced back to the budget's structural problems. A good budget prevents social explosions.

The Story in Numbers: A 30-Year Picture

Let me end with a numerical illustration. Imagine two countries, A and B. Both have GDP of $300 billion, population of 17 crore.

Country A has a good budget. Annual GDP growth of 7%. Because private investment is high, infrastructure is solid, and inflation is low. Over 30 years, country A's GDP grows from $300 billion to $2,282 billion. About 7.6 times. Per-capita income rises from $1,800 to $14,000.

Country B has a bad budget. Annual GDP growth of 4%. Over 30 years, country B's GDP grows from $300 billion to $973 billion. About 3.2 times. Per-capita income rises from $1,800 to $6,000.

The difference? The average person in country A is 2.3 times richer than the average in country B. After 30 years. Purely from budget discipline. The compounding effect of a 3-point growth gap.

These A and B are South Korea and the Philippines. In 1960, the two countries were almost identical. Today South Korea is five times richer than the Philippines. The primary reason, budget decisions.

In simple terms: Budgets are not technical documents. They are fate-decisions. Investment, inflation, credit ratings, infrastructure, social stability, all rest on them. Compounded over 30 years, these decisions change a generation's destiny. The 5-fold gap between South Korea and the Philippines today is the fruit of budget decisions made 60 years ago.

Every budget presentation produces the same single word. Ambitious. In the government's language, in critics' language, in editorial language, the same word. Big budget, big targets, big plans.

But there is a difference between ambition and illusion. One builds the future. The other pays interest on old debt and calls it progress.

A big budget does not mean a good budget. A good budget means standing on your own feet, building the future, running on less debt, government and central bank coordinating, and distributing fairly.

The FY27 budget is ambitious in numbers. In reality, 15% of the budget goes just to interest payments. Tax-to-GDP is the lowest in South Asia. Private investment is at a 15-year low. The government and the central bank are running in opposite directions. The biggest subsidies go to those who need them least.

Still, there is no reason to lose hope. Where Vietnam stood in 1986, we are around there. Where Singapore stood in 1965, we stand much higher. Where South Korea stood in 1960, we stand far above. All three countries transformed themselves through budget discipline. We can too.

But "we can" doesn't mean it will happen. Decisions must be made. Today. Not in this year's budget. Not in next year's. In long-term structural reform. Broadening the tax base, debt discipline, subsidy targeting, central bank coordination.

The core disease is the same. We are still standing on a pyramid of debt, where every brick is borrowed. Each new budget adds another borrowed brick to the pyramid. And we call it "development."

A good budget is not just a bigger number. A good budget is one that, when you read it, lets you see the country's days ahead. Not the debt behind.

"Every budget is, at heart, an answer to a question. The question is, what will we leave to the next generation? Schools, hospitals, roads, or a mountain of debt? A country that collects only 7.4% in taxes and pays 15% of its budget in interest, its answer is written in numbers. South Korea gave one answer 60 years ago. The Philippines gave another. Today the gap between them is fivefold. Our question is still open. The answer is still in our hands."

References

Article Sources

• Bangladesh Ministry of Finance — Budget Speech and Documents FY26-27 (June 2026)
• Bangladesh Bank — Monetary Policy Statement, January 2026
• National Board of Revenue (NBR) — Annual Report 2025-26
• World Bank — Bangladesh Development Update, April 2026
• IMF — Bangladesh Article IV Consultation, February 2026
• Asian Development Bank — Bangladesh Macroeconomic Update 2026
• Bangladesh Bureau of Statistics (BBS) — Monthly Statistical Bulletin, May 2026
• Centre for Policy Dialogue (CPD) — Bangladesh Economy in FY27, June 2026
• OECD — Tax Statistics 2026 (cross-country comparison)
• International Budget Partnership — Open Budget Survey 2025
• Norges Bank Investment Management — GPFG Annual Report 2025
• Ministry of Finance Singapore — Budget Statement 2026
• World Bank — Government Finance Statistics 2026

Facts and Figures

• FY27 Budget total: 9.38 lakh crore taka — Ministry of Finance
• Interest payment: 1.42 lakh crore taka (15.1% of budget) — Ministry of Finance
• Tax-to-GDP ratio: 7.4% (2026) — NBR / IMF Article IV
• VAT-to-GDP: 3.86% vs Income-tax-to-GDP: 2.26% — NBR Annual Report
• Budget deficit FY27: 2.35 lakh crore taka (~5.1% of GDP) — Ministry of Finance
• Lending rate range 2026: 14-16% — Bangladesh Bank Statistical Department
• Private investment-to-GDP: ~22% (2026, 15-year low) — World Bank
• Repo rate raised from 7% (2024) to 10% (2026) — Bangladesh Bank
• Total public debt: ~22 lakh crore taka (2026) vs 12 lakh crore (2021) — BB
• South Asia Tax-to-GDP: India 17%, Vietnam 18%, Nepal 19%, Pakistan 9.5% — IMF FAD
• FY27 Subsidies: Electricity 37,000 cr, Fertilizer 27,000 cr, LNG 6,500 cr, Food 9,600 cr — Finance Division
• Singapore SWF AUM ~$900B (GIC + Temasek) — official disclosures
• Norway GPFG AUM $1.7 trillion (2026) — NBIM
• Germany Schuldenbremse threshold: 0.35% structural deficit — Bundesfinanzministerium
• Vietnam infrastructure spend: 6-7% of GDP — Vietnam Ministry of Planning
• Korea R&D-to-GDP: 4.6% — OECD MSTI
• Bangladesh R&D-to-GDP: ~0.6% — BANBEIS
• Bangladesh FDI inflow 2026: $1.4B vs Vietnam $24B — UNCTAD
• Greece 2010 deficit: 15% of GDP, peak debt ~180% — Eurostat
• Sri Lanka 2022 default — first sovereign default in Asia since 2017, IMF EFF
• Open Budget Index: Bangladesh 36/100, South Africa 83/100 — IBP 2025

Concepts Referenced

• Crowding out effect — Bangladesh Bank Research Department working papers
• Policy trap — IMF Working Paper WP/24/176 on fiscal-monetary coordination
• Inflation as silent tax — Milton Friedman, original framing
• Public Choice subsidies capture — James M. Buchanan, public choice theory
• Compounding effect on growth — Solow growth model
• Schuldenbremse (Debt Brake) — Article 109/115 of German Basic Law (2009)

International Case Studies Referenced

• Singapore: GIC, Temasek, balanced budget 30+ years — IMF Singapore Article IV
• Norway: GPFG, oil revenue management — Ministry of Finance Norway
• Germany: Schuldenbremse, post-2009 fiscal discipline — Bundesbank
• Vietnam: Doi Moi reforms, infrastructure investment — ADB Vietnam Country Diagnostic
• South Korea: 1960-2020 transformation — World Bank 'Korea as a Knowledge Economy'
• Chile: Structural fiscal rule, copper-based stabilization fund — IMF Working Paper WP/12/123
• Greece 2010 crisis — IMF EFF, Eurogroup bailout history
• Sri Lanka 2022 default — IMF EFF, World Bank crisis brief
• South Korea vs Philippines 1960-2026 divergence — World Bank Development Indicators