A new fiscal year, a reform with economic risks

The government is preparing for a change in how it plans, spends, taxes and measures its economy. From fiscal year 2028-29, the country will move from the July-June fiscal year to an April-March cycle, with FY2027-28 becoming a nine-month transition period. Bangladesh has struggled to implement its development budget on time. In FY2025-26, only 67.52 percent of the revised ADP allocation was utilised, the lowest implementation rate in the past five years.

The logic behind the change in the fiscal year is to finish major infrastructure work before the monsoon instead of pushing contractors to build roads, bridges and public facilities during heavy rain, which adds to costs. An April fiscal year could create a better operating rhythm. Plan in April, procure early, execute through the dry months and finish before the next major monsoon. But can this shift be treated as an economic reform? A new fiscal calendar can improve the timing of growth, but it cannot create growth unless institutions, businesses and markets are ready to use that time better.

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The biggest catch will be the nine-month transition year in FY2027-28. The first stress test will be managing an unusual financial year for government, banks and businesses. Budgets, revenue targets, government procurement, depreciation schedules, financial reporting, loan covenants, tax calculations, corporate strategies and targets must be replanned. Revenue collection could be sensitive. NBR collected Tk 360,642 crore during July-May of FY2025-26 and remained Tk 81,442 crore below its target for those 11 months. A compressed transition year could intensify pressure on revenue collection if targets are not redesigned prudently.

For corporates, the biggest risk is comparability. A nine-month year consisting of three quarters cannot be directly compared with a normal 12-month year having four quarters. Sales, profit, tax, loan growth, working capital and employee performance may appear artificially higher or lower, making confusion costly. Banks and financial institutions will need to reinterpret annual goals, loan renewals, covenant testing, costing budgets, revenue targets, provisioning cycles and customer cash-flow assessments. The transition is happening at a time when private-sector credit growth has already fallen to historically low levels. SMEs dependent on government contracts may feel the impact more.

Entrepreneurs and investors, foreign and local, may postpone investment during the transition because they may not confidently forecast demand, taxation and government spending. That would be dangerous when Bangladesh is already struggling to revive private investment. From the government side, project timing may change during the transition year. Procurement and public-service expenditure could become uneven. Salary, subsidy, social safety-net and development spending schedules may need fine-tuning or sudden adjustment. Businesses may also revise prices, hiring plans and investment decisions.

These issues matter because inflation is still high. Average inflation fell to 8.68 percent in FY26 from 10.03 percent in FY25, but remained above 8 percent for the fourth consecutive year. Bangladesh cannot afford prolonged weakness in investment and employment. IMF data put FY25 real GDP growth at around 3.8 percent, after 7.1 percent growth only three years earlier.

The solution is not to reject the reform. It is to build thoughtful safeguards around it. Bangladesh needs to measure success differently. The success of the new fiscal year should not be judged by how smoothly the government closes its accounts. It should be judged by how rapidly roads are constructed, how efficiently businesses invest, how many jobs are created and how much private capital is mobilised. The question is no longer whether Bangladesh should change its fiscal year. It is whether Bangladesh is prepared to change the way it creates real economic growth for the nation.

The writer is a senior banker