Bangladesh’s budget reveals that Yunus-government is a mere placeholder

This year’s budget reflects Bangladesh’s strained financial health.

On 2 June, Bangladesh’s interim administration—formed in the wake of a political upheaval—unveiled the national budget for the fiscal year 2025–2026. This budget, amounting to Taka 7,90,000 crore (roughly $64.6 billion), marks the first fiscal roadmap under the stewardship of the Muhammad Yunus-led interim government. Notably, this year’s budget modestly lower than the previous Tk 7,97,000 crore proposal, reflects Bangladesh’s strained financial health. The economic terrain the interim government has inherited is riddled with deep-rooted problems—soaring inflation, a persistent dollar crisis, dwindling foreign currency reserves, rising unemployment, and a ballooning debt load.

Faced with these economic tremors, the interim regime claims to have designed a budget that seeks to address foundational issues with realism rather than utopian ambition. The Finance Advisor described it as a “realistic” and “pragmatic” fiscal document, focused more on the welfare of the people than on chasing lofty growth rates. According to him, the budget champions a balanced approach to development—which he called “holistic.” However, beneath this veneer of idealism lies a matrix of inconsistencies and policy paradoxes.

A budget without a vision

The interim government claims that it has expanded allocations to critical sectors such as health, education, agriculture, and digital technology. These areas are rightly deemed the pillars of long-term socio-economic advancement for any nation, especially one with a lower-income economy like Bangladesh. Yet, the allocation numbers themselves tell a tale of contradiction.

Health has been allocated only 5.3% of the total budget (Tk 41,908 crore), far short of the 15% recommended by the Health Reform Commission. Similarly, the education sector—often paraded as a key priority—received a mere 12.1% of the total outlay (Tk 95,644 crore), which again is below the UNESCO benchmark of 15–20%. Agriculture, a sector vital for both food security and rural livelihoods, has been handed just under 6% (Tk 39,620 crore). Token tariff cuts within the agriculture section appear more cosmetic than curative and are unlikely to mitigate the pressures borne by farmers battling inflation and volatile markets.

Experts have voiced their dissatisfaction with not just the limited allocations but also the absence of a strategic framework for effective implementation. Without robust investment strategies and a vision for job creation, these allocations become numbers devoid of purpose. Bangladesh’s demographic dividend cannot be leveraged without serious investments in human capital, yet this fundamental is glaringly overlooked.

Unwilling to undertake challenging structural reforms

Equally concerning is the budget’s inertia on structural economic reforms. A glaring example lies in the unchanged tax system, which continues to suffer from inefficiencies, evasion, and corruption. Despite persistent calls for overhaul, the budget introduces no meaningful modernisation of the taxation mechanism. There are no significant steps towards enhancing institutional accountability or curbing irregularities in public expenditure. In effect, the interim government has missed an opportunity to inject transformative change into the economic governance of the country.

One particularly contentious element in the original budget draft was the proposal to legalise undisclosed income—commonly referred to as “whitening black money.” Bangladesh, plagued by money laundering and illicit wealth accumulation, has long needed strict mechanisms to halt this cancer. Yet, the budget offered an amnesty by allowing the investment of undeclared wealth in property and construction, effectively legitimising corruption. Such measures do not only erode the moral fabric of a democracy but also directly contradict the interim government’s professed aim to eliminate corruption. Critics argued that this provision was aimed more at appeasing political stakeholders than at serving the public interest.

Unsurprisingly, the budget faced a torrent of criticism from all corners—political parties, civil society, and economic analysts alike. Opposition leaders dismissed it as disconnected from the pressing needs of citizens and bereft of the bold reforms necessary to address ongoing economic uncertainties. Transparency International Bangladesh (TIB) went so far as to call the black money provision “unconstitutional,” denouncing it as discriminatory and ethically indefensible.

The looming presence of China

By the time the final budget was approved on 22 June to take effect from 1 July, the uproar had forced the interim government to drop the controversial clause on black money whitening. While this move has been framed as a commitment to transparency, it doesn’t wash away the broader concerns surrounding the budget’s direction. Many critics argue that the budget’s primary focus remains overly skewed towards courting foreign investment and managing external debts, rather than bolstering social welfare.

Indeed, the spectre of Bangladesh’s rising debt looms large. The country’s external debt surpassed the USD 100 billion mark last year—doubling in just over five years. Alarmingly, a significant chunk of this debt—nearly 24%—is owed to China, a legacy of the fallen administration’s indiscriminate indulgence in infrastructure projects funded by Beijing under the Belt and Road Initiative (BRI).

The political change in Dhaka has thrown the future of Chinese-backed projects into a cloud of uncertainty. However, China remains undeterred. It continues its diplomatic manoeuvring—from party-to-party engagement to maintaining cordial relations with the interim leadership. For Beijing, Bangladesh remains a strategic prize, and China is playing the long game.

Although Chief Advisor Yunus has announced that no new mega projects will be initiated under his watch, his own initiatives raise eyebrows. His March visit to Beijing resulted in renewed Chinese involvement in Bangladesh’s infrastructure. Agreements include potential Chinese stewardship of the Teesta River management project, a billion-dollar loan package, and suggestions of a 50-year water management plan led by Beijing. Not to mention, Chinese involvement in the modernisation of Mongla Port. These steps are eerily reminiscent of the previous regime’s over-reliance on Chinese capital—despite Bangladesh’s persistent trade deficit with China, even after receiving duty-free trade facilities.

The push for foreign direct investment, especially from Beijing, appears to contradict the interim government’s avowed aim to diversify Bangladesh’s economy. Instead of correcting course, the new leadership seems to be walking the same tightrope as its predecessor. Earlier in January, Bangladesh’s foreign advisor even requested China to ease the terms of its loans—seeking a one percent interest rate, cancellation of commitment fees, and an extension of repayment timelines. But Beijing merely extended a tepid verbal agreement to consider stretching the repayment period.

Bangladesh’s policy makers need to be watchful

This situation is worryingly reminiscent of the Sri Lankan debacle with Hambantota. Dhaka must remain vigilant lest it fall into the same trap. The desperate chase for foreign investment—if not prudently managed—could plunge the nation into a debt crisis and compromise its sovereignty.

The interim budget, therefore, emerges as a mixed bag. While it avoids flamboyant spending and removes a glaringly unethical clause, it falls short of being a visionary document. The focus on foreign capital inflow over internal human development, and a continued flirtation with Chinese capital, could well entangle Bangladesh into deeper vulnerabilities. Unless the government reorients its priorities towards structural reform, investment in people, and sustainable self-reliance, the nation risks repeating its past errors.

As Bangladesh walks a tightrope amid economic fragility and geopolitical pressures, it must trade its cards with foresight. Pragmatism must not come at the cost of prudence. And above all, national interest must outweigh short-term political comfort.