How the FY2026-27 budget can bridge Bangladesh's climate finance gap

Bangladesh’s development trajectory has increasingly been shaped by climate change impacts, putting growing pressure on how public finance is allocated and utilised to deliver sustainable outcomes. The country is considered one of the most climate-vulnerable in the world and has regularly been ranked among the top in the global Climate Risk Index, including 7th in 2021 and 13th in 2025 (long-term). Climate change impacts are estimated to cause Bangladesh an average annual loss of around $3 billion, equivalent to nearly one to two percent of its GDP, creating a growing economic burden on the country’s overall growth and development.

Over the past several decades, governments and state administrations in the country have consistently demonstrated their commitment to environmental protection and climate action through various policies, strategies, and budgetary measures, designating climate change as a shared national priority despite broader political divisions. However, whether the current climate-related public financing is proportionate to the country’s high level of vulnerability, and adequately aligned with its most critical adaptation and resilience needs, remains a critical question. Evidence shows that existing resources remain far below actual requirements, continue to rely on domestic public financing, and often struggle with implementation weaknesses, institutional inefficiencies and inadequate sectoral prioritisation, which are critical challenges to delivering effective outcomes.

The new government, which assumed office in February 2026, has expressed strong commitment to environmental protection and climate action in its election manifesto and has made a number of pledges such as renewable energy expansion, large-scale tree planting, flood protection, river restoration, climate-smart agriculture, and broader sustainable development initiatives, which are highly relevant within the country’s climate and environmental policy context. As its first fiscal plan, the national budget for FY2026-27 will therefore be an important opportunity to translate these political commitments into actionable measures. In this context, several climate financing priorities deserve closer attention.

Funding for climate action has grown steadily in recent years, although the overall funding remains modest relative to the scale of need. According to data from the finance ministry, climate-related public expenditure increased from Tk 24,226 crore in FY2020-21 to over Tk 42,206 crore in FY2024-25, reflecting growing government attention to the crisis. However, spending on climate action has remained below one percent of GDP in the last six fiscal years (including the outgoing one), which is insufficient compared to the estimated annual budget need of around three percent of GDP. This gap becomes more evident when viewed against the country’s long-term adaptation needs. The National Adaptation Plan (2023-2050), which serves as the country’s principal adaptation framework, estimates total adaptation requirements at around $230 billion by 2050, with an annual need of $8.5 billion. In contrast, the current annual climate-related finance flows are estimated at around $2-3 billion only, indicating a substantial gap between required investments and available resources. This growing mismatch between financing needs and available resources highlights the importance of adopting a more responsive and adequate climate finance arrangement in the upcoming national budget.

Bangladesh’s climate finance structure remains heavily dependent on domestic public resources due to the limited scale of international climate finance inflows. Recent estimates reveal that the average annual climate finance utilisation stands at around $2.76 billion, of which international finance accounts for only about $0.52 billion, representing less than 20 percent of total flows. This gap is particularly significant as the country contributes around 0.4 percent of global greenhouse gas emissions but remains among the most vulnerable countries to climate change impacts.

In addition to this, Bangladesh has so far been able to secure only $464.6 million from the Green Climate Fund (GCF), the principal global climate financing mechanism for vulnerable developing countries, despite requiring an estimated $230 billion by 2050 per the National Adaptation Plan. Therefore, the FY2026-27 budget needs to place a stronger focus on strengthening climate finance strategies, particularly improving access to international climate finance mechanisms.

The effectiveness of climate financing in Bangladesh has also been challenged by persistent weaknesses in the implementation of development projects. The Annual Development Programme (ADP) implementation rate declined to only 68 percent in FY2024-25, the lowest in 49 years. Similarly, ADP implementation remained at just over 36 percent in the first nine months of FY2025-26, indicating continued weaknesses in project execution capacity in recent years. These trends suggest that increasing climate-related allocations alone will not be sufficient without ensuring implementation efficiency, strengthening coordination, and effective accountability mechanisms for the timely and high-quality delivery of development projects.

Another important concern for the upcoming budget is the limited prioritisation of research, innovation and knowledge management within the broader climate change agenda. Although the overall climate allocations have increased over the years, investment in research and knowledge systems has gradually declined. The share of climate-related allocations dedicated to research and knowledge management declined significantly from around 5.98 percent in FY2015-16 to only 2.47 percent in FY2024-25, despite their significance in long-term adaptation planning, innovation, and evidence-based policymaking. Strengthening investment in climate research and knowledge systems should, therefore, receive greater attention in the upcoming budgetary process.

In conclusion, the FY2026-27 budget should move beyond symbolic climate commitments and place stronger emphasis on increasing climate investment, in line with the country’s growing adaptation and resilience demands. At the same time, greater attention is needed to improving access to international climate finance, particularly given Bangladesh’s high level of climate vulnerability and widening financing gap. The budgetary process should also emphasise strengthening implementation efficiency, institutional coordination, accountability mechanisms, and the promotion of continuous research, innovation and knowledge management to fortify long-term resilience. As the new administration’s first fiscal plan, this budget presents an important opportunity to translate political commitments into a more practical, adequately-financed and implementation-oriented climate finance framework for the country.

Muhammad Muktadirul Islam Khan is principal researcher and head of consultants at Sustainability Action Learning Lab. He can be reached at muktadir@sustainabilitybd.org. 

Views expressed in this article are the author's own. 

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