Govt suspends interest-free car loans in major austerity drive

The government has suspended interest-free car loan facility for officials from the rank of deputy secretary to the highest levels of the civil administration, marking a major shift in public spending policy as part of a sweeping austerity drive to contain expenditure in the 2026-27 fiscal year.

The decision, announced in a Finance Division circular on Wednesday, is part of a sweeping fiscal austerity package aimed at curbing public expenditure and strengthening budget discipline amid mounting fiscal pressures. 

The measures impose stringent curbs on new vehicle purchases, construction of government buildings, land acquisition, foreign travel, overseas training and other non-essential spending across the public sector.
 
As part of the drive, the government has also suspended the Tk 30 lakh interest-free vehicle loan facility for officials, signalling a shift towards greater fiscal prudence. The only exception will be for the purchase of Fully Electric Vehicles (FEVs), reflecting the government's commitment to promoting cleaner transport while containing public spending.

The move, announced in a Finance Division circular issued on Wednesday, forms part of a broader package of fiscal tightening measures that also impose stringent restrictions on new vehicle purchases, building construction, land acquisition, foreign travel, overseas training and other non-essential government spending. The only exception to the vehicle loan suspension will be for the purchase of fully electric vehicles (FEVs).

The directives will apply to all ministries, government departments, autonomous and semi-autonomous bodies, statutory organisations, state-owned enterprises, corporations and state-owned financial institutions.

The circular follows the Cabinet's approval of a series of austerity measures at its meeting on April 2, reflecting the government's efforts to improve expenditure management amid mounting fiscal pressure and sluggish revenue collection.