Little room for major changes in new budget

Renowned economist and former adviser to the interim government Prof Wahiduddin Mahmud has said that the upcoming national budget is unlikely to include major new initiatives, stressing instead the need to prioritise export-oriented industries and small and medium enterprises (SMEs).

In an interview with Bangladesh Pratidin on Thursday, he said the International Monetary Fund would continue to support Bangladesh out of its institutional mandate.

“The IMF will provide loans to Bangladesh out of its own necessity, as its role is to support countries in crisis. The delay in loan disbursement is mainly a tactic to push for reforms by an elected government,” he said.

However, he noted that this is not an ideal time for major reforms, given the ongoing economic strain caused by geopolitical tensions, particularly conflicts in the Middle East.

Advisory committee and planning approach

The government recently formed a 36-member advisory committee, led by Prof Mahmud, to formulate a five-year economic plan. The committee includes economists, researchers, academics, and senior representatives from various institutions, and is expected to complete its work within two to three months.

Commenting on the process, Mahmud said a smaller group of economists should first outline key recommendations before involving ministries. He also emphasised the need to evaluate past plans—particularly the Eighth Five-Year Plan—before designing new strategies.

“Future planning must be closely aligned with the Annual Development Programme (ADP),” he added.

Energy crisis and public communication

Mahmud expressed sympathy for the current government, stating that it inherited the ongoing energy crisis and bears little responsibility for its origins.

“The shortage of fuel and gas is affecting daily life and increasing pressure on low-income groups. This is not unique to Bangladesh; countries like India and Pakistan are facing similar challenges,” he said.

He urged the government to be transparent about the crisis, including its causes and planned responses, to build public trust.

Budget constraints and economic risks

Regarding the upcoming budget, Mahmud said there is limited scope for major policy shifts.

“The government will have to keep energy subsidies at a realistic level. Revenue shortfalls are likely, which may widen the budget deficit,” he said.

He warned that a higher deficit could crowd out private sector investment, while increased borrowing could fuel inflation.

Priority sectors: exports and SMEs

Mahmud stressed that sustaining the economy will require a strong focus on export-oriented industries and SMEs.

“If I were a policymaker, I would prioritise export sectors and give the highest importance to energy. A contractionary monetary policy should continue,” he said.

He highlighted the role of SMEs in job creation, cautioning that neglecting the sector could lead to rising unemployment and poverty.

He also noted that a previous initiative by the interim government to provide credit support to SMEs did not progress due to a lack of pressure from the central bank.

Overall, Mahmud underscored that while immediate large-scale reforms may not be feasible, targeted support for key sectors and prudent economic management will be critical in navigating the current challenges.