United News of Bangladesh

Economists and sector experts have urged the government to prioritize the agriculture sector in the upcoming national budget for the fiscal year FY2026-27, warning that the continued decline in budgetary allocation could jeopardize long-term food security and inflation control. The call comes ahead of the national budget announcement scheduled for June 11, with a projected outlay of nearly Tk 9.38 lakh crore. Despite being a key economic driver that ensures food security, generates 40 percent of total employment, and keeps the rural economy functional, agriculture's share in the national budget has been under 10 percent for the last 14 consecutive fiscal years. In the ongoing FY 2025-26, the allocation plummeted to a record low of just 5.9 percent, according to an official document. Expressing deep concern over this trend, the Bangladesh Agricultural Economists Association has demanded an allocation of at least 9.5 percent of the upcoming budget for agriculture, which would amount to roughly Tk 88,350 crore. Professor ASM Golam Hafeez, a prominent faculty member at the Bangladesh Agricultural University (BAU) and General Secretary of the Bangladesh Agricultural Economists Association (BAEA), recently shared substantial policy recommendations for the national budget of FY2026-27. Professor Hafeez pointed out a worrying downward trend over the last three fiscal years, highlighting that agriculture's share in the national budget dropped from 8.7 percent in FY2022-23 to just 5.9 percent in the current fiscal year, FY2025-26. He urged the government to bump this allocation back up to 9.5 percent for the upcoming budget FY2026-27. Given a projected national budget of Tk 9.3 lakh crore, this 9.5 percent allocation would translate to approximately Tk 88,350 crore for the agricultural sector. A major highlight of his recent budget recommendation was the call to significantly expand input subsidies due to soaring farming expenses. Professor Hafeez demanded that the government increase agricultural subsidies to Tk 35,000 crore for the budget of FY2026-27. This is more than double the current allocation of Tk 17241 crore. He argued that global energy market instabilities, geopolitical tensions (particularly involving Iran and the Strait of Hormuz), and exchange rate volatility have sharply driven up the import costs of fertilizer, fuel, seeds, and agricultural machinery—placing immense financial strain on farmers. Talking with UNB, Tawfiqul Islam Khan, a Senior Research Fellow and Additional Research Director of CPD, said that the government has to increase allocation in the agricultural sector, considering the global geopolitical situation and its impact on food security. “Bangladesh has a huge population despite limited agricultural land, flash floods and other natural disaster is occurred in every season, so the budget allocation should focus on additional food production to keep macroeconomic stability,” he pointed out. He said that eroding crop land and the high cost of production have forced farmers to reduce crop production to recover from loss. In this case, the budget should emphasize keeping the price of agriculture impute rational for encouraging agricultural production at the national level.  Widening Gap in Allocations and Subsidies: While agriculture contributes roughly 11 percent to the GDP, fiscal support has failed to keep pace with the growing economy. In FY 2011-12, the agricultural sector received 10.65 percent of the total budget. This dwindled to 8.7 percent in FY 2022-23 and hit 5.9 percent this fiscal year. Furthermore, the actual crop sector received only Tk 27,224 crore—a mere 3.45 percent of the total budget—out of the Tk 46,268 crore allocated across five agriculture-related ministries. Concurrently, agricultural subsidies saw a decline, dropping from Tk 17,261 crore in FY 2024-25 to Tk 17,241 crore in the current fiscal year, said Tawfiqul of CPD. "Agricultural subsidy is not an expense; it is a long-term investment," noted prominent agricultural economist Professor Jahangir Alam. He warned that lower investments will inevitably suppress production, increase import dependency, and aggravate food inflation, which has hovered above 10 percent for most of the last four years, he opined. Structural Shifts and Market Bottlenecks: Experts pointed out that while farmers have significantly ramped up the production of rice, vegetables, fish, maize, and potatoes, they are continually deprived of fair prices due to the dominance of middlemen and lack of state storage facilities. The current public warehouse capacity stands at only 22 lakh tonnes against an immediate national requirement of at least 60 lakh tonnes. The lack of cold chains and processing industries results in massive post-harvest losses every year. The nature of Bangladesh’s agriculture is also shifting structurally. The crop sector's share in agricultural GDP has fallen from over 75 percent post-independence to around 46 percent today, with fisheries, livestock, and forestry gaining rapid ground. However, skyrocketing prices of animal feed and poultry medication have left dairy and poultry farmers under severe strain, said Professor Hafeez. Climate Vulnerability and Mechanization Slowdown: The sector faces growing threats from climate change. This year, early flash floods and heavy rainfall severely damaged Boro paddy crops across the vast Haor (wetland) regions, crippling farmers' incomes. Experts have strongly recommended emergency compensation funds, weather-resilient crop varieties, and the introduction of comprehensive agricultural insurance. Additionally, the government's agricultural mechanization subsidy project has largely stagnated. Policy analysts suggested setting up union-based agricultural machinery banks to help marginalized farmers and offering tax exemptions to boost domestic manufacturing of machinery spare parts. Currently, Bangladesh spends a mere 0.4 percent of its agricultural GDP on research and development, compared to the 3 to 5 percent spent by many developing nations. To deliver a truly farmer-friendly fiscal plan, experts summarized that the upcoming budget must elevate agricultural financing to at least 10 percent, raise subsidies to Tk 40,000 crore, digitize the procurement system via a national farmer database, and fast-track investments in climate-smart technologies.  

The government is set to implement a strategic shift in the national budget for fiscal year 2026-27 by significantly reducing its reliance on internal debt, particularly from the banking sector, according to an official working on budget preparation. This move aims to maintain macroeconomic stability, control persistent inflation, and ensure an uninterrupted flow of credit to the private sector, the official said, wishing anonymity. According to sources at the Ministry of Finance and Bangladesh Bank, the proposed budget for FY27 is estimated at Tk 9.38 lakh crore. While the projected budget deficit stands at approximately Tk 2.43 lakh crore, the government plans to borrow only Tk 1.19 lakh crore from internal sources. This represents a Tk 18,000 crore reduction from the current fiscal year's revised internal borrowing target of Tk 1.37 lakh crore. Shift Towards Foreign Financing To bridge the deficit while easing pressure on local banks, the government is pivoting towards long-term and more affordable international loans. The target for foreign borrowing is projected to reach Tk 1.16 lakh crore in the next fiscal year, nearly doubling the current year's revised target of Tk 63,000 crore. Officials believe that reduced government borrowing will leave banks with surplus funds to invest in industrialisation and business expansion. Furthermore, this strategy is expected to mitigate the inflationary pressures previously caused by excessive bank borrowing and the printing of money by the central bank. Aggressive Revenue Targets and Reforms To compensate for the reduction in internal debt, the National Board of Revenue (NBR) is undertaking massive reforms to achieve a revenue collection target of Tk 6.95 lakh crore. Key measures include expanding the tax net and withdrawing various VAT exemptions, increasing tax rates on online gaming and luxury goods, and enhancing transparency and liquidity within the banking sector. Economists have welcomed the move on paper but cautioned that its success depends heavily on the pace of foreign aid disbursement and the government's ability to meet its ambitious revenue targets. Former NBR Chairman Dr Muhammad Abdul Majid warned that if the NBR fails to collect the desired revenue, the government might be forced to return to heavy bank borrowing by the end of the year, risking further financial instability. While talking to UNB, he emphasised the need for strict monitoring and financial discipline from the beginning of the fiscal year.  

The Federal Reserve on Wednesday raised its benchmark interest rate by a hefty three-quarters of a point for a second straight time in its most aggressive drive in more than three decades to tame high inflation. The Fed’s move will raise its key rate, which affects many consumer and business loans, to a range of 2.25% to 2.5%, its highest level since 2018. Speaking at a news conference after the Fed’s latest policy meeting, Chair Jerome Powell offered mixed signals about the central bank’s likely next moves. He stressed that the Fed remains committed to defeating chronically high inflation, while holding out the possibility that it may soon downshift to smaller rate hikes. And even as worries grow that the Fed’s efforts could eventually cause a recession, Powell passed up several opportunities to say the central bank would slow its hikes if a recession occurred while inflation was still high. Roberto Perli, an economist at Piper Sandler, an investment bank, said the Fed chair emphasized that “even if it caused a recession, bringing down inflation is important.” But Powell’s suggestion that rate hikes could slow now that its key rate is roughly at a level that is believed to neither support nor restrict growth helped ignite a powerful rally on Wall Street, with the S&P 500 stock market index surging 2.6%. The prospect of lower interest rates generally fuel stock market gains. At the same time, Powell was careful during his news conference not to rule out another three-quarter-point hike when the Fed’s policymakers next meet in September. He said that rate decision will depend upon what emerges from the many economic reports that will be released between now and then. “I do not think the U.S. is currently in a recession,” Powell said at his news conference in which he suggested that the Fed’s rate hikes have already had some success in slowing the economy and possibly easing inflationary pressures. The central bank’s decision follows a jump in inflation to 9.1%, the fastest annual rate in 41 years, and reflects its strenuous efforts to slow price gains across the economy. By raising borrowing rates, the Fed makes it costlier to take out a mortgage or an auto or business loan. Consumers and businesses then presumably borrow and spend less, cooling the economy and slowing inflation. The surge in inflation and fear of a recession have eroded consumer confidence and stirred public anxiety about the economy, which is sending frustratingly mixed signals. And with the November midterm elections nearing, Americans’ discontent has diminished President Joe Biden’s public approval ratings and increased the likelihood that the Democrats will lose control of the House and Senate. The Fed’s moves to sharply tighten credit have torpedoed the housing market, which is especially sensitive to interest rate changes. The average rate on a 30-year fixed mortgage has roughly doubled in the past year, to 5.5%, and home sales have tumbled. Consumers are showing signs of cutting spending in the face of high prices. And business surveys suggest that sales are slowing. The central bank is betting that it can slow growth just enough to tame inflation yet not so much as to trigger a recession — a risk that many analysts fear may end badly. At his news conference, Powell suggested that with the economy slowing, demand for workers easing modestly and wage growth possibly peaking, the economy is evolving in a way that should help reduce inflation. “Are we seeing the slowdown in economic activity that we think we need?” he asked. “There’s some evidence that we are.” The Fed chair also pointed to measures that suggest that investors expect inflation to fall back to the central bank’s 2% target over time as a sign of confidence in its policies. Powell also stood by a forecast Fed officials made last month that their benchmark rate will reach a range of 3.25% to 3.5 % by year’s end and roughly a half-percentage point more in 2023. That forecast, if it holds, would mean a slowdown in the Fed’s hikes. The central bank would reach its year-end target if it were to raise its key rate by a half-point when it meets in September and by a quarter-point at each of its meetings in November and December. With the Fed having now imposed two straight substantial rate hikes, “I do think they’re going to tiptoe from here,” said Thomas Garretson, senior portfolio strategist at RBC Wealth Management. On Thursday, when the government estimates the gross domestic product for the April-June period, some economists think it may show that the economy shrank for a second straight quarter. That would meet one longstanding assumption for when a recession has begun. But economists say that wouldn’t necessarily mean a recession had started. During those same six months when the overall economy might have contracted, employers added 2.7 million jobs — more than in most entire years before the pandemic. Wages are also rising at a healthy pace, with many employers still struggling to attract and retain enough workers. Still, slowing growth puts the Fed’s policymakers in a high-risk quandary: How high should they raise borrowing rates if the economy is decelerating? Weaker growth, if it causes layoffs and raises unemployment, often reduces inflation on its own. That dilemma could become an even more consequential one for the Fed next year, when the economy may be in worse shape and inflation will likely still exceed the central bank’s 2% target. “How much recession risk are you willing to bear to get (inflation) back to 2%, quickly, versus over the course of several years?” asked Nathan Sheets, a former Fed economist who is global chief economist at Citi. “Those are the kinds of issues they’re going to have to wrestle with.” Also read: Bangladesh inflation lower than many countries in the world: Info Minister Economists at Bank of America foresee a “mild” recession later this year. Goldman Sachs analysts estimate a 50-50 likelihood of a recession within two years.