The government has planned a Tk 8.48 lakh crore budget for the next fiscal year, up 6.3 percent from this year's budget, as it looks to usher in a period of moderate growth and low inflation.

The GDP growth target could be set at 5.5 percent and the inflation at 7 percent, The Daily Star has learnt from finance ministry officials involved with working out the budget for the next fiscal year.

In the new budget, the size of the next annual development programme (ADP) will be Tk 2.70 lakh crore. Though the original ADP budget for this fiscal year is Tk 2.65 lakh crore, it will be revised down to Tk 2.16 lakh crore.

At the Fiscal Coordination Council meeting where the budget for fiscal 2025-26 was discussed, directives were issued to the Finance Division and Planning Division to sit with different ministries and divisions to start preparation for the next budget.

Allocations for the health and education sectors would be increased, while more allocation was suggested for priority projects and those expected to be completed by the next fiscal year.

Moreover, an instruction was given not to undertake any new mega projects if they are not important and foreign funds are not confirmed. Also, the meeting suggested taking on a few innovative projects.

The government's interest payments and expenditure for subsidies rose significantly in the past couple of years and are likely to increase further in the next fiscal year, said finance ministry officials.

In the budget for the present fiscal year, Tk 113,500 crore was allocated for interest payments, of which Tk 42,388 crore was spent in the first quarter. This is a 92 percent increase compared with the same period of fiscal 2023-2024.

Though the government cleared a significant amount of arrears for subsidies in power, energy and fertiliser sectors this fiscal year, it has a plan to clear another big chunk in the next fiscal year as well.

In the next budget, big allocations will be made for these two sectors, the officials said.

Besides, the interim government is also considering giving dearness allowance to government employees.

As a result, the allocation in this sector could cross Tk 100,000 crore in the next budget from Tk 82,000 crore this year.

Besides, even if the government cuts some ongoing "prestige or political projects" from the ADP, it will have very little scope to cut the ADP size next year considering other ongoing large projects including various infrastructure projects, the finance ministry officials said.

The upcoming budget would be implementable as people would not have to bear extra tax burden, said Finance Adviser Salehuddin Ahmed.

Both the monetary and fiscal policies would be synced by way of the next budget.

"I know there will be criticisms about this budget -- we can't make everyone happy at once," Ahmed added.

However, economists questioned the wisdom of having such a large budget given the present context.

"Considering the actual situation of high inflation and low revenue collection, there is no logic to go with such a large budget for which you will have to borrow from domestic banks," said Zahid Hussain, former lead economist of the World Bank's Dhaka office.

It is important what goals the government wants to set while preparing the national budget in the context of the present situation, Hussain said.

In the present context, the main priority should be to control inflation so that an additional stress is not created in the economy.

If the size of the next budget actually surpasses the present one, the government might have to borrow from banks for financing, which could negatively impact both investment and inflation, Hussain added.

There needs to be a realistic assessment of the existing budget before starting preparations for the next one, said Selim Raihan, executive director of the South Asian Network on Economic Modelling.

He said he had made a proposal for a quick assessment of the present budget by November before revision. It would have been better to come up with targets for the next budget based on that assessment, said Raihan, also a professor of economics at Dhaka University.

A committee should have been formed comprising experts for reviewing the projects instead of assessing those on an ad hoc basis and depending only on the bureaucrats.

About increasing the health and education sector allocations, he said problems in the two sectors will not be solved by providing more funds to them.

"The capacity of the relevant ministries has to be strengthened. Otherwise, the money will be sent back."

For this, he suggested that the government should take measures to improve services at delivery points.

There is scope to reconsider many of the budget expenditures, Hussain said, adding that it is possible to cut various expenditures for subsidy.

On increasing health and education sector allocations, he said opportunities for poor people to get healthcare services and education declined for high inflation.

In this regard, the government could increase allocation for conditional cash transfer programmes in these two sectors, he added.