Staff Reporter :
In a recent discussion on the proposed budget for the fiscal year 2024-25, held at a capital hotel and organized by The Editors’ Council and the Newspaper Owners’ Association of Bangladesh (NOAB), Dr. Wahiduddin Mahmud, a prominent economist and former finance adviser to the caretaker government, addressed critical issues plaguing Bangladesh’s economy.
Emphasizing the detrimental impact of political interference on economic integrity, Dr. Mahmud underscored the urgent necessity to safeguard certain sectors from political influence.
He warned against the encroachment of political power into economic matters, citing it as a root cause of corruption and irregularities within the system.
“We are gradually moving towards an unethical economic situation,” remarked Dr. Mahmud, expressing concerns over the absence of a coherent economic policy despite aspirations for a smarter Bangladesh.
He lamented the lack of confidence in the banking sector, attributing it to inadequate regulatory measures and ineffective functioning of institutions like the Bangladesh Financial Intelligence Unit (BFIU), which has failed to curb money laundering activities and the proliferation of black money.
As a former Professor of Economics at Dhaka University, Dr. Mahmud elucidated the multifaceted challenges confronting the country’s economy.
These challenges include internal inflation, revenue collection shortfalls, stagnation in export and remittance flows, disorder in the capital market, and rampant corruption and irregularities in government expenditure.
Dr. Mahmud’s assessment of Bangladesh’s economic state was stark: “The overall economy is now in a state of fragility and instability,” he declared, characterizing the budget as nothing more than a “sacrificial lamb” amidst the prevailing crisis.
Mahmud, a former adviser to a caretaker government, cautioned that a substantial portion of the budget deficit might need to be filled through bank loans, citing concerns over the perilous implications of printing new money.
Wahiduddin, another key figure, raised alarm bells over the disparity between the projected private sector credit growth of 9 percent and the escalating rate of defaulted loans.
He asserted that such a scenario undermines the feasibility of extending new loans, thus rendering the budget’s estimations for private sector investment unrealistic.
Additionally, he highlighted the broader economic challenges facing Bangladesh beyond the global crisis, warning against the looming threat of a debt trap.
Joining the discourse were Hossain Zillur Rahman, executive chairman of the Power and Participation Research Centre; Salehuddin Ahmed, former governor of the Bangladesh Bank; Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh; and Fahmida Khatun, executive director of the Centre for Policy Dialogue (CPD).
Rahman, speaking at the event, criticized the finance minister’s focus on three major entities in the proposed budget—the International Monetary Fund (IMF), oligarchs, and bureaucracy—while neglecting public welfare considerations. He suggested a systemic bias favoring these entities’ interests to the detriment of public welfare.
Ahmed echoed concerns over the budget’s reliance on bank loans to address the deficit, cautioning that while the budget might be touted as contractionary, such reliance on loans does not align with contractionary principles.
“If the government borrows more, how can the private sector borrow? And if the private sector does not get loans, how will there be employment? In this situation, the small and medium industry sector will be the most affected.”
The former central bank governor stated that the banking sector is now in dire condition due to “extreme lack of good governance”.
“Loan default has now become a business model for the country. You take a loan from the bank, and never pay it back. This model is ongoing,” he added.