Govt sets 5.1% GDP growth target, inflation below 6.5% with focus on climate spending

The federal government has set a GDP growth target of 5.1% and an inflation ceiling of 6.5% for the 2026–27 federal budget, while placing climate action, green development and disaster management at the centre of fiscal planning.

According to an official circular, the Ministry of Finance has approved the budget preparation schedule for the next financial year, with the interim macroeconomic framework due to be finalised within the current month.

The ministry said the Mid-Year Review report will be presented to the National Assembly in February. All ministries have been directed to submit key budget documents, revised revenue and expenditure estimates, and detailed development project proposals by February 20.

Inflation for FY27 is projected to remain contained at 6.5%, with greater emphasis on green taxation, non-tax revenues and climate-related subsidies. Ministries have been instructed to identify and separately tag environmental and climate-related expenditures, making climate budgeting a mandatory component of the process.

The finance ministry said a strengthened disaster budgeting framework is also being developed, with separate monitoring of disaster-related spending to mitigate the impact of natural calamities. Natural resource categories and subsidies will be classified under climate action measures.

Under the proposed framework, agricultural insurance and climate-resilient infrastructure will be categorised as climate adaptation, while clean energy initiatives and electric vehicle incentives will fall under climate mitigation spending.

The ministry said non-tax revenues will be assessed for environmental impact, with levies on pollution-linked activities aligned with climate targets. Priority areas under the green revenue agenda include energy, transport and pollution management.

The budget calendar outlines that meetings of the Budget Review Committee will be held from March 30 to April 12, while exchange rate assumptions will be shared on April 15. Approval of the Budget Strategy Paper is expected by April 20, followed by the issuance of budget ceilings for current and development expenditures between April 21 and 25.

Meetings of the Annual Plan Coordination Committee are scheduled for the first week of May, followed by a session of the National Economic Council in the second week of May. All budget documents are to be finalised by the end of May, with quarterly estimates to be submitted by June 30.