During the recent tenure of the Awami League, electricity prices surged by 188 percent, and the cost of WASA water nearly doubled. July 2024 witnessed the highest food inflation in 13 years. Budget allocations for health and education sectors have been proportionately reduced. A significant portion of the social safety net expenditure is consumed by pensions, a considerable amount of which goes to fake or non-existent beneficiaries. The costs of major infrastructure projects, including roads and railways, are among the highest globally per kilometer. Over the past 15 years, government debt has increased by more than BDT 15 trillion, leading to a substantial portion of the budget being allocated to debt repayment. This large budget, much of which has been siphoned off by a privileged segment of society through theft and corruption, reflects the government's fiscal approach.

On August 5, the Awami League government fell. An interim government has taken charge. The President has dissolved Parliament. However, the tax, duty, and expenditure structure for the 2024-25 fiscal year remains unchanged. The provision for legalizing black money still exists. The public is now waiting for the new interim government to reform and amend this budget, which many see as detached from the needs of the people. With the President's approval, there is an opportunity to announce a people-friendly budget for the remainder of the fiscal year. Experts suggest that the new budget should focus on measures to reduce inflation, increase government spending on health and education, lessen the burden of indirect taxes on the public, and make utilities like electricity and water more affordable.

In the last decade and a half, government budgets have heavily relied on debt. However, the full implementation of the budget was not possible in any financial year. According to statistics from the Ministry of Finance, from the 2008-09 fiscal year to 2022-23, the average budget implementation rate was 86 percent, leaving 14-15 percent unimplemented each year. This unimplemented portion has grown over time.

Economists predict that at least 20 percent of the 2024-25 budget will be impossible to implement. They estimate that BDT 1.59 trillion will need to be cut from the revised budget. The projected revenue targets are unlikely to be met, and the anticipated loans to cover the deficit may not materialize. If unnecessary development projects are scrapped, and corruption is curbed, the BDT 7.97 trillion budget could be reduced to BDT 5 to 5.5 trillion. In this scenario, it would be essential to increase allocations to sectors like education, health, and social protection by cutting less critical development projects.

For several years, Bangladesh's economy has been in a downturn. High inflation has left people struggling, while the country has faced challenges in foreign trade due to dollar shortages and dwindling reserves. Despite this, each successive budget has surpassed the previous one in size.

In the current fiscal year, the revenue target is BDT 5.41 trillion, with a deficit of BDT 2.51 trillion to be financed through loans from domestic and international sources. The development expenditure is set at BDT 2.81 trillion, of which BDT 2.65 trillion is allocated for the Annual Development Program (ADP). The GDP growth target in the budget is set at 6.75 percent, and inflation is expected to be brought down to 6.5 percent. However, by July, inflation had almost doubled the target.

The announced budget included a reduction in the source tax on the supply of essential goods and food grains from 2 percent to 1 percent, aimed at stabilizing the market. Despite reducing tax and duty, prices have continued to rise. Inflation reached 11.66 percent, the highest in 15 years. July also saw unprecedented economic stagnation due to student protests, clashes, and government measures.

Former Finance Secretary and Comptroller and Auditor General (CAG) Mohammad Muslim Chowdhury believes that the governance structure for physical infrastructure projects is weak. Therefore, new spending on infrastructure should be significantly reduced. Instead, priority should be given to repairing existing structures. Funds saved from infrastructure could be redirected to improving health services, education quality, and skill development. The rising cost of living has pushed many below the poverty line, making it necessary to increase spending on social protection to alleviate their hardships. Money should be spent only in sectors where people will benefit directly.

The government's debt burden has ballooned due to years of announcing large deficit budgets. According to Ministry of Finance’s data, by the end of June, the government's debt from domestic and foreign sources stood at BDT 18.35 trillion. When Sheikh Hasina assumed power in 2009, the debt was only BDT 2.76 trillion. Over 15 years of Awami League rule, the debt increased by BDT 15.58 trillion, accounting for approximately 85 percent of the total government debt.

The government has borrowed heavily from domestic and international sources to cover operational and development costs. However, the recently ousted government's cronies face numerous allegations of widespread corruption. The banking sector, in particular, has suffered from rampant looting. Embezzled funds have been laundered to various countries, including the United States and Europe. An analysis of data from Global Financial Integrity (GFI) shows that during Sheikh Hasina's 15-year tenure, at least USD 149.20 billion, equivalent to BDT 17.60 trillion at current exchange rates, was laundered out of the country. Bangladesh's usable net reserves now stand at less than USD 16 billion.

In the current 2024-25 fiscal year, the government announced plans to borrow BDT 1.37 trillion from domestic banks to cover the budget deficit. However, the country's banking sector does not have the capacity to lend this amount. The banking sector has been grappling with a liquidity crisis for the past three years due to irregularities, corruption, and embezzlement. An analysis of data from the Ministry of Finance shows that from 2018 to 2022, the government's borrowing from domestic sources, including banks, increased by nearly BDT 4 trillion. By the end of December 2017, the total government debt from domestic sources was BDT 3.20 trillion, which had ballooned to BDT 7.17 trillion by the end of 2022.

Last year, when the banking sector failed to provide loans to the government, the Bangladesh Bank resorted to printing new currency to meet the demand. As a result, the government's domestic borrowing surged to BDT 10.35 trillion. In addition to the central bank, the government also tapped into various instruments like savings certificates and loans from banks and financial institutions within the country. The steep rise in the government's borrowing needs has led to a significant increase in interest rates, with Treasury bill and bond rates now hovering around 12-13 percent, a sharp contrast to the 1-6 percent range from two years ago.

Over the past decade and a half, the government has also borrowed heavily from foreign sources, citing development projects. In 2010, the government’s external debt stood at only $20.33 billion. However, according to the Ministry of Finance, this figure escalated to $59.21 billion by February 2023. However, Bangladesh Bank data further reveals that by the end of March 2024, the external debt of the government and state-owned enterprises had surged to $79 billion. Given the current exchange rate of BDT 118 per dollar, the government’s total debt exceeds BDT 9.32 trillion. The mounting debt has led to an alarming rise in interest expenses, with the current fiscal year's budget allocating over BDT 1.12 trillion solely for interest payments.

In light of these developments, Dr. Zahid Hussain, former Chief Economist of the World Bank’s Dhaka office, suggests a comprehensive review of the entire budget. Speaking to Bonik Barta, he emphasized, “The budget comprises three parts—revenue collection, government expenditure, and budget deficit financing. It’s not feasible to address everything at once. Prioritization is essential, and I believe the focus should first be on expenditures. The government is currently in a financial crunch, and we need to assess whether the target of BDT 8 trillion in spending can be financed. Similarly, the revenue collection target must be realistically and objectively evaluated.”

He further added, “There are numerous projects under implementation in sectors like local government, energy, and transportation, financed from domestic resources, which were undertaken due to political, personal, and group interests. Such projects should be excluded. The Annual Development Program has room for cuts, where priorities need to be re-evaluated.”

The burden of the government's overspending and corruption in both development and operational sectors is falling on the public. Prices for essential goods and services, including fuel, electricity, gas, and water, are escalating. On top of that, consumers are also paying higher tariffs on these products. Due to the failure to collect taxes from the wealthy, the government has had to rely more on value-added tax (VAT), increasing the tax burden on the general population. Meanwhile, owners of black money are regularly granted unjust privileges to legalize their wealth, a policy that remains in place in the current fiscal year's budget. Moreover, capital gains taxes have been imposed on struggling stock market investors, though the budget provides no information on the projected revenue from this measure.

Since the Awami League came to power in 2009, electricity prices at the consumer level have surged by 188 percent as of August 2024. Over the past decade and a half, electricity tariffs have been raised 14 times, with prices increasing in phases for all categories of consumers. Between January and February of last year, electricity prices were raised by a total of 15 percent, and in February of this year, they were increased by another 5 percent. As part of the government's commitment to gradually eliminate subsidies in the energy sector under IMF conditions, the ousted Awami League government had announced a policy of raising electricity prices four times annually.

Similarly, gas prices have been hiked repeatedly, increasing by nearly 400 percent between 2009 and 2023. Despite assurances of reducing inflation, gas prices were once again raised in February of this year, following another increase in January of the previous year.

The government imports fuel oil and sells it to the public. According to Bangladesh Petroleum Corporation (BPC), the corporation has earned a profit of BDT 475 billion from oil sales over the past decade. Despite having these funds, BPC continues to profit from fuel sales. However, as a state-owned enterprise, BPC is supposed to be more focused on selling fuel oil at an affordable price instead of profit.

In 2009, when the Awami League government took office, Dhaka residents were paying BDT 5.75 for every thousand liters of water. By 2024, that cost has soared to BDT 16.70 per thousand liters, a nearly threefold increase over 16 years. This price hike is widely attributed to rampant corruption within Dhaka WASA.

It’s not just electricity, fuel, or Dhaka WASA; the country's banking sector is currently experiencing unprecedented instability as well. In recent years, Bangladesh Bank has liberalized various policies, including loan rescheduling and write-offs, effectively masking the true extent of non-performing loans (NPLs). Additionally, banks owned by influential businessmen and ruling party leaders have been allowed to engage in widespread irregularities and corruption, with little to no proper auditing conducted. Industry insiders estimate that at least BDT 7 trillion worth of loans, including anonymous, rescheduled, and written-off loans, are unlikely to be recovered. A significant portion of these loans has been siphoned out of the country. When Sheikh Hasina's government took office in 2009, the amount of non-performing loans in the banking sector was only BDT 224.82 billion.

In this turbulent environment, Dr. K.A.S. Murshid, former Director General of the Bangladesh Institute of Development Studies (BIDS), argues that the interim government must take pragmatic and decisive measures. Speaking to Bonik Barta, he said, “There are issues in our banking sector and revenue management. Questions surround the size, implementation, and efficiency of the budget. Particularly, no investigation has ever been conducted into why implementation has been so challenging. Institutions related to the financial sector, such as Bangladesh Bank, NBR, and the Ministry of Finance, require systematic reforms. In this regard, capable and competent leadership must be appointed. There may also be a need for changes in laws and regulations. The government must clearly outline the areas they intend to reform, and once announced, the reforms must be promptly initiated.”