The government is moving decisively to cut its heavy reliance on bank borrowing, with Finance Minister Amir Khosru Mahmud Chowdhury saying the current model-built on double-digit interest loans from commercial banks-is no longer sustainable and is squeezing private investment.
Speaking at a budget dialogue organised by the Centre for Policy Dialogue (CPD) on Sunday, the minister said borrowing at rates of 10 to 13 per cent is pushing up the government’s cost of funds while crowding out businesses that depend on bank credit.
He made it clear that continuing on this path would weigh on economic activity and undermine growth.
The policy direction now is to shift toward market-based financing. The government plans to gradually deepen the capital market, expand the use of bonds and diversify funding sources so that budget financing becomes less dependent on banks. Chowdhury said the transition will be calibrated, combining domestic revenue mobilisation, concessional external funds and market instruments to keep overall costs manageable.
At the same time, the minister signalled administrative changes to support this shift. A real-time dashboard to track budget implementation is set to go live in early July, while the National Board of Revenue will be split into two divisions as part of a broader deregulation push. He said resistance to reform will not be tolerated.
However, the government is also wary of leaning too heavily on foreign borrowing. With global interest rates rising, the cost advantage of loans from institutions like the and the has narrowed.
Combined with a persistently low tax-to-GDP ratio and declining aid flows, this leaves policymakers with limited room and reinforces the need for a blended financing approach.
Fiscal pressure is already intense. Around 26 percent of the current budget is being absorbed by debt servicing, sharply limiting space for new spending. Officials acknowledged that the present budget was framed under severe constraints, including inherited liabilities and external shocks.
Despite the tight conditions, the government says it will maintain focus on social and development priorities. Plans include expanding direct cash transfers-particularly to women through bank-linked family card programmes-to reduce leakage and strengthen household finances. Support for agriculture, food security measures, and increased investment in education and healthcare will continue, with a long-term aim of lifting allocations in these sectors to about five percent of GDP.
There will also be a stronger push toward skills development, vocational training and youth employment, especially in ICT, freelancing and startup ecosystems.
The CPD fellow Mustafizur Rahman chaired the event while State Minister for Planning Jonaed Abdur Rahim Saki and Akhtar Hossain, Member of Parliament who was elected from the National Citizen Party (NCP) were present as special guests.
The budget discussion featured contributions from Hossain Zillur Rahman, Executive Chairman of the Power and Participation Research Centre (PPRC); M. A. Razzak, Chairman of Research and Policy Integration for Development (RAPID); Anwar-ul-Alam Chowdhury, President of the Bangladesh Chamber of Industries (BCI); Enamul Haque Khan, Senior Vice-President of the BGMEA and Montu Ghosh, President of the Garments Workers Trade Union Centre.
The keynote paper was presented by CPD Executive Director Dr. Fahmida Khatun.
