Former governor of Bangladesh Bank Dr. Salehuddin Ahmed stated on Monday that not repaying bank loans has now become a new model for the country's economy.
He made the remarks at a discussion titled "Economic Pattern and Proposed Budget 2024-25," organized by the Editor Council and the Newspaper Owners’ Association of Bangladesh (NOAB).
"You take a loan from the bank and don’t pay it back. This model of defaulted loans has now become a business model," said Salehuddin.
He criticised the proposed budget for failing to introduce innovative measures to address the ongoing macroeconomic crisis. "The budget has been presented at a challenging time. I don’t see anything new in it,” he added.
According to him, the figures from the previous budget have merely been adjusted. Although the budget is described as contractionary, the budget deficit suggests otherwise, he noted.
He highlighted that reliance on bank loans to cover the budget deficit has increased, which could adversely affect the private sector. “If the government takes more loans, how will the private sector get loans? And without loans, how will there be employment?” he questioned.
Dr Salehuddin also mentioned that the small and medium enterprises (SME) sector would be negatively impacted by the proposed budget. He criticised the 1,285 new projects included in the budget, suggesting that halving them could reduce government debt dependence and the budget deficit. He lamented the lack of solid steps in the policy strategy and philosophy of the budget, which are crucial during this crisis.
The budget should be performance-based, he argued. "Some organisations should be closed if necessary, and some companies need to reduce their workforce. Simply tossing around budget figures is futile,” he emphasised.
“Tough steps are needed to resolve the crisis, and they should be transparent, like sunlight. Otherwise, the problem will persist,” he added.
Dr. Salehuddin also expressed scepticism about controlling inflation through IMF advice, which includes increasing interest rates, a market-based dollar exchange rate, and contractionary monetary policy.
The event also featured speeches by former caretaker government adviser Dr Wahiduddin Mahmud, Comptroller and Auditor General Mohammad Muslim Chowdhury, and CPD Executive Director Dr. Fahmida Khatun.
