Govt tightens the belt with fresh spending curbs

The government has imposed a fresh round of austerity measures for the fiscal year 2026-27, restricting spending on new vehicles, buildings, land acquisition and most foreign travel to rein in public expenditure, curb inflation and preserve macroeconomic stability.

In a circular issued yesterday, the Finance Division directed all ministries, departments, autonomous bodies, state-owned enterprises, statutory organisations and public sector corporations to cut costs from both operating and development budgets.

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The move comes as the government faces mounting challenges in maintaining public expenditure amid slower-than-expected revenue growth.

BORROWING OVERSHOOTS AMID REVENUE SHORTFALL

In the just-concluded fiscal year, government borrowing from the banking sector exceeded its initial target of Tk 104,000 crore.

Last month, the National Board of Revenue (NBR) said its total collection might reach Tk 415,000 crore in the 2025-26 financial year, falling Tk 88,000 crore short of its target.

The tax authority, which generates 86 percent of the country’s annual revenue, recorded 10 percent year-on-year growth to Tk 360,642 crore during the July-May period of the 2025-26 fiscal year.

For the current fiscal year, the government has set the NBR a revenue collection target of Tk 604,000 crore to help finance the Tk 938,000 crore budget.

Analysts have said achieving the target will be challenging given the current pace of revenue growth and the absence of reforms.

The economy is also grappling with high inflation, which averaged 8.68 percent in the 2025-26 fiscal year, subdued private investment and renewed global uncertainty caused by the US-Israel-Iran conflict. The BNP-led government, which was sworn in this February, first tightened public spending through a directive issued in March.

SPENDING FREEZE HITS PURCHASES, ALLOCATIONS

In its latest directive, issued yesterday, the Finance Division said all block allocations under the operating budget have been frozen, while the purchase of motor vehicles, vessels and aircraft has been suspended.

However, exceptions will be allowed for replacing government vehicles that are more than 10 years old and for newly established government institutions, subject to prior approval from the Finance Division.

Except for ambulances and security vehicles, all replacement or newly purchased government cars and jeeps must be fully electric.

The government has also suspended spending on the construction of new residential, non-residential and other government buildings.

Only projects where construction has reached at least 70 percent completion will be allowed to continue, subject to Finance Division approval.

The circular also suspended spending on land acquisition under the operating budget and discontinued interest-free loans for government employees to purchase private vehicles.

Under the Annual Development Programme (ADP), the government has also banned the purchase of vehicles for development projects. The restriction, however, will not apply to projects where vehicle procurement had already been approved before the circular was issued.

Land acquisition under development projects will require prior approval from the Finance Division after all legal and administrative formalities have been completed.

Similarly, any spending from the government’s reserved allocation for “development assistance for special needs” under the Planning Commission will require prior approval from the Finance Division.

The government has also significantly tightened rules governing overseas travel by public officials.

All government-funded foreign training programmes, seminars, symposiums and workshops have been suspended.

Officials will still be allowed to travel abroad for master’s and PhD programmes funded through scholarships or fellowships provided by foreign governments, universities or development partners.

Participation in overseas training programmes financed entirely by foreign governments, international organisations or development partners will also remain permissible.

The foreign component of mandatory and basic training programmes may continue if organised by appropriate overseas universities or institutions.

The circular also permits overseas travel for highly specialised inspections, such as Pre-shipment Inspection (PSI) and Factory Acceptance Tests (FAT), but only where the products are technically complex, or such inspections are mandatory.

In such cases, only relevant experts or technically certified officials may undertake the visits.