Interest waiver to top defaulters objectionable: Dr Farashuddin

Former central bank governor Dr Mohammed Farashuddin has called the Tk 550 billion interest waiver for top loan defaulters "highly objectionable". While speaking at a programme in Dhaka on Friday, he said government banks should classify these loans as defaulted.
He also said the government would not be able to achieve its FY25 budgetary target of reducing inflation to 6.5 per cent. The former governor called for balancing stocks and supply of essentials, saying the artificial supply chain crises earlier led to famine.
Dr Farashuddin, who was the chief guest at a debate finale event organised by Debate for Democracy on budget 2024-25, criticised the government's heavy bank borrowing target for FY25.
"Ongoing cycles of money laundering, corruption and loan defaults will pose a serious threat to the government if left unchecked," he commented.
"Waiving Tk 550 billion in loan interest for top defaulters is completely unacceptable," he said in his speech.
Dr Farashuddin cast doubt on the government's inflation targets. He said while the budget projected a reduction to 6.5 per cent, the actual inflation rate is now closer to 10 per cent.
Drawing a parallel to the past, he warned against manipulating essential stocks and supplies, which he said contributed to the famine of 1974.
Dr Farashuddin defaulted loans, which according to the Bangladesh Bank amount to Tk 1,820 billion, are likely closer to Tk 2,000 billion in reality.
In his address, the economist emphasised the need for the government to borrow less from banks. He warned that increased government borrowing would restrict loan availability for private sector players, obstructing new investments and economic growth.
The former governor instead advocated for increased borrowing through savings tools. He believes that this would help reduce inflationary pressures and strengthen social safety net coverage.
Dr Farashuddin argued for an increase in the government's borrowing target outlined in the budget.
He was critical of the lack of clear directives in the new budget to address money laundering, saying IMF influence might be behind this omission.
Dr Farashuddin raised concerns about the risks associated with the Tk 960 billion in foreign loans mentioned in the budget.
He recommended the government minimise reliance on both domestic and foreign loans, as he again advocated for increased borrowing through savings tools.
Jagannath University emerged victorious in the shadow parliament debate titled "This Year's Budget Will Help Sustainable Development," defeating debaters from Comilla Victoria Government College.
Professor Abu Muhammad Raees, journalist Zakir Hossain, journalist Doulat Akter Mala, journalist Umman Nahar Azmi and journalist Sushant Sinha were the judges for the competition.
The winning team received trophies, crests and certificates at the end of the competition.

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