Default loan model now business norm: ex-governor Salehuddin

Former Bangladesh Bank Governor Salehuddin Ahmed has criticised the country's current financial practices, stating that the default loan model has now become the business norm.

"You take loans from the bank and don't repay them. This has become the norm. The model of non-performing loans is now the country's business model," he said during a discussion on the proposed budget organized by the Editors’ Council and the Newspaper Owners' Association of Bangladesh (NOAB) at a Dhaka city hotel on Monday.

Criticising the budget for its lack of novelty, Mr Ahmed said, "The budget has been presented during a challenging time, but I don't see anything new in it. The figures from the previous budget have just been shuffled around. It's claimed to be a contractionary budget, but the deficit doesn't support that claim."

The former central bank governor expressed concern that increased dependence on bank loans to meet the budget deficit could negatively impact the private sector.

He argued that inflation cannot be controlled by raising interest rates, increasing the value of the dollar, and implementing contractionary monetary policies as advised by the International Monetary Fund (IMF).

He emphasised the need to control the current level of inflation through market monitoring and increased supply.

Regarding the Annual Development Program (ADP), Mr Ahmed said that Tk 2.65 trillion has been allocated for the ADP in the proposed budget but it should not have exceeded 1.0 to 1.5 trillion at this critical moment.

Criticising the addition of as many as 1,285 new projects, he said that halving this number would reduce the government's dependence on loans and the budget deficit, noting that there robust measures should have been in the budget’s policy strategy and vision as they are crucial at this time.

Former governor Mr Ahmed emphasised that the budget should be performance-based. If needed, some agencies should be shut down and at some others, manpower should be reduced. Merely shuffling budget figures around is futile; tough measures are needed, and transparency must be like sunlight. If these steps are taken, the size of the budget will not be an issue.