Defaulted loan model is business model in Bangladesh now: Salehuddin Ahmed

Salehuddin Ahmed addresses discussion on the status of the economy and the proposed budget for 2024-25FY, organised jointly by the Editors’ Council and Newspaper Owners Association of Bangladesh (NOAB) on 10 June, 2024Prothom Alo

The model of defaulted loans is now the business model of the country, said Salehuddin Ahmed, former governor of Bangladesh Bank, Monday.

“You will take a loan from the bank and not repay it. This model is now running in the country. This model of defaulted loans is now the business model of the country,” he said.

Salehuddin Ahmed said this in a discussion on the status of the economy and the proposed budget for 2024-25FY, organised jointly by the Editors’ Council and Newspaper Owners Association of Bangladesh (NOAB) on Monday.

Commenting that there is nothing new in the proposed budget, Salehuddin Ahmed said, “The budget has been presented at a challenging time. But I don’t see anything new in it. The figures of the previous budget have only been tweaked here and there. It is being said that the budget is contractionary but if you look at the budget deficit, it won’t not seem contractionary.”

Dependency on bank loans to meet the budget deficit has increased and this will have a negative impact on the private sector, said Salehuddin Ahmed.

He further said, “If the government takes more loans, how would the private sector get loans? And if the private sector does not get loans, how will there be employment?”

He thinks the small and medium industries (SME) sector will also be affected due to the proposed budget.

Salehuddin Ahmed further said that inflation cannot be brought under control by increasing the interest rate, the value of the dollar and contractionary monetary policy as per the advice of the International Monetary Fund (IMF).

He said that the rate at which inflation has gone must be controlled. For this market supervision and supply should be increased.

Speaking about the banking sector, Salehuddin Ahmed said that the sector is in dire straits and there is an extreme deficiency in good governance.

Salehuddin Ahmed said that the annual development programme (ADP) size of Tk 2.65 trillion in the proposed budget was not appropriate. Instead, according to him, the ADP size could have been not more than Tk 1-1.5 trillion, at the moment.

Criticising the 1,285 new projects that have been taken up, Salehuddin Ahmed said that the government’s debt dependence and budget deficit will be reduced if the number of the project is halved. No solid steps are seen in the policy strategy and philosophy of the budget. But that was what was needed at this time, he argued.

The former governor of the central banks also said that the budget should be performance-based. Some organisations must be closed if necessary. And some departments’ have to downsize the human resources.