Dr Selim Raihan is a professor of economics at the University of Dhaka and the executive director of the private research organisation South Asian Network on Economic Modeling (SANEM). In a recent interview with Bonik Barta, he discussed the flaws in Bangladesh’s budget philosophy and the sectors the new government should prioritise in its first budget. The interview was conducted by Sabidin Ibrahim.

What is the flaw in our budget philosophy, and how should the new government break from convention?

The fundamental weakness is that we still treat the budget essentially as an income-expenditure ledger. A national budget should serve as a policy document for economic transformation. It should spell out which sectors the government will prioritise over the coming year, which reforms it will implement, where jobs will be created, how investment barriers will be reduced, and how poor and lower-middle-class people will be protected. Our budgets mention these, but they lack a strong implementation framework. The result is a budget that too often becomes a grand document of announcements rather than an effective blueprint for change.

Every year we see much the same budget. There’s pressure to raise revenue, but no courage to reform the tax structure. Spending goes up, yet the quality of that spending is rarely discussed. Long-term priorities — education, health, social protection, research, jobs, climate resilience, renewable energy, industrialisation, export diversification — rarely get the weight they deserve. Meanwhile, subsidies, interest payments, administrative costs and inefficient project spending lock up the bulk of the budget.

So the new government must, first of all, make reform the central thrust of its first budget. It’s not enough to increase allocations; we need to track what those allocations actually deliver. We need a results-based budget framework. What matters more than how much money a ministry receives is how many jobs it helps create, how many students become skilled, how many patients are treated, how much investment flows in, and how many poor households are reached. The budget must be tethered to a medium-term economic strategy. A single-year budget should be conceived as one instalment of a five-year transformation plan.

Revenue reform is another big task. Bangladesh’s tax-to-GDP ratio has been extremely low for a very long time. With such limited revenue, it’s impossible to finance development, social protection, infrastructure, education, health and climate adaptation. But raising tax doesn’t mean putting pressure on ordinary people. The tax system must be made fair, modern and automated. Tax evasion has to be curbed, tax exemptions reviewed, effective taxation imposed on the wealthy and high-income earners, and the tax framework for business made predictable. That’s the first condition for leaving conventional budgeting behind.

What direction do you expect on energy security and renewables in the new government’s first budget?

Bangladesh’s biggest energy-security weakness is import dependence. When global energy prices spike or supply gets disrupted, the economy comes under immediate strain. Power generation costs rise, the subsidy burden swells, pressure builds on foreign-currency reserves and industrial output takes a hit. Energy security, therefore, can’t be seen merely as a question of power generation. It’s directly tied to macroeconomic stability, industrialisation, export competitiveness and social stability.

The new government’s first budget should declare renewable energy a strategic priority. Renewables still account for a tiny share. There’s no room for a slow approach. Clear allocations and policy backing are needed for solar power, rooftop solar, solar irrigation, renewables in industrial zones, solar panels on government buildings and grid modernisation. Announcing targets alone won’t do the job. We must set up an effective framework for project execution, land management, grid connectivity, financial incentives and private investment.

Tax and customs concessions for renewables could be further rationalised in the budget. Import duties and VAT structures on solar panels, inverters, batteries, smart meters, grid technology and energy storage need to be rethought. At the same time, scope for local manufacturing has to be created while ensuring that protecting local production doesn’t unreasonably inflate the cost of the technology.

Energy efficiency is another big area. We often talk too much about new generation and far too little about energy saving, efficient appliances, industrial energy audits and building energy standards. The new budget ought to include a separate allocation for energy efficiency programmes. Low-interest green loans for industry, bank refinancing and incentives for technology upgrades can be put in place. That would cut energy imports, reduce production costs and lighten our environmental liabilities.

The non-performing loan and bad debt crisis isn’t going away. What should the new government do about the weak banks?

This is no longer a problem confined to a few banks. It’s a deep institutional crisis for the economy. Non-performing loans, abuse of rescheduling, political and vested-interest pressure on loan approvals, weak supervision and unethical behaviour by boards have together created a severe trust deficit in the banking sector. Restoring that trust demands tough, transparent and politically neutral action.

For the weak banks, the first task is to establish their true financial condition. The picture shown on many balance sheets doesn’t fully reflect reality. An independent asset quality review is essential. The public and policymakers need a clear view of each bank’s actual non-performing loans, capital shortfalls and provisioning gaps. You can buy time by hiding the problem, but you can’t solve the crisis that way.

Second, there must be a differentiated policy. Trying to rescue every bank in an identical fashion is a mistake. Where a bank is restructurable, it requires a time-bound restructuring plan covering recapitalisation, a change of management, a loan-recovery strategy, cost-cutting and strict oversight. For banks that are effectively non-viable, the path should be merger, acquisition or an orderly exit. Depositors’ interests must be protected, but the state isn’t responsible for shielding weak owners or dishonest borrowers.

Third, recovering bad loans requires genuine political will. Large defaulters must face swift trials, asset seizures, investigations into money laundering abroad and special recovery measures. Repeated rescheduling rewards defaulters, punishes honest entrepreneurs and further degrades banking culture. The new government must send an unmistakable signal: the culture of borrowing without repaying is over.

How should bank ownership and boards be structured? What’s your advice for restoring professionalism and discipline?

Bank boards must be professional, independent and accountable. In practice, many function as an extension of the ownership group. When the board is stuffed with family members, close business associates, politically connected figures or people with a stake in a borrower’s interests, it becomes extremely difficult to protect the bank’s own interests. Loan approvals, risk management, audit and internal controls all suffer as a result.

The role of the independent director must be substantially strengthened. But independent in name won’t do. Directors need demonstrable expertise in banking, economics, accounting, risk management, law, technology and corporate governance. Excessive control by a single family or group has to stop. There must be strict rules on directors’ tenure, qualifications, conflicts of interest and related-party lending. The “fit and proper” test has to be applied in reality, not on paper.

It’s also vital to increase the independence and supervisory muscle of the Bangladesh Bank. The central bank must be able to operate free from political pressure. It needs the power to move swiftly when a board engages in irregularities. At the same time, the effectiveness of a bank’s internal audit, external audit, risk management committee and credit committee has to be raised. The sector requires technology-based surveillance, a comprehensive database of large borrowers and real-time monitoring of related-party loans.

To bring back professionalism, bank management must be kept distant from owners’ direct influence. Transparency is needed in the appointment, removal and evaluation of managing directors and senior executives. Discipline will return to the banking sector only when honest bankers are protected, unethical directors face actions and loan defaulters can no longer use political or social clout to escape liability.

What sort of budget for education, health and research could turn Bangladesh’s population into a genuine asset?

Bangladesh’s great strength is its people. But people become an asset only when there is sustained investment in education, health, skills and innovation. For years, our budgets have starved these sectors of the priority they need. Allocations are low, spending quality is weak, and outcomes consistently fall short. It’s easy to talk about a demographic dividend; turning that into reality is an altogether harder proposition.

The education budget must shift its focus away from buildings and infrastructure and onto learning quality, teacher training, curriculum development, digital skills, language ability, science and mathematics teaching and technical training. The most urgent task is to reduce the learning deficit at primary and secondary level. Students who spend ten years in school and still leave without basic literacy, numeracy, analytical ability and problem-solving skills will start at a permanent disadvantage — whether they go on to higher education or directly into the labour market.

Health needs a similarly fundamental reset. Out-of-pocket health expenditure in Bangladesh remains extremely high. A single serious illness can push a poor or lower-middle-class family into economic collapse. The budget should direct far more investment into primary healthcare, improve upazila and district-level hospitals, and strengthen maternal and child health, nutrition, mental health and the management of non-communicable diseases. The sector faces shortages across the board: staffing, medicines, equipment and management.

Research and innovation must be given a distinct priority in the budget, not folded in as an afterthought. Productivity won’t rise without an effective working link between universities, research institutions, industry and government. Dedicated research funds are needed in agriculture, health, energy, climate adaptation, industrial technology, the digital economy and artificial intelligence. If we intend to compete in the economy of the future, research can’t be treated as a luxury. It’s a bedrock investment in development.

Why can’t our general and technical education align with global standards, and what needs to change?

The core problem is the weak link between the education system and the labour market. General education still leans heavily on rote memorisation, with too little focus on analytical skills. Technical education faces serious gaps in hands-on training, modern equipment, industry linkage and the quality of trainers. The result is that degrees are being awarded, but skills aren’t being built. This paradox is simultaneously feeding both unemployment and the skills deficit.

Three shifts are essential to meet global standards. First, the curriculum must be modernised. Learning must move beyond passing exams and towards problem-solving, communication, teamwork, digital competence, an entrepreneurial mindset and the ability to work with technology. Second, the quality of teachers and trainers must rise sharply. Without teacher development, education reform can’t succeed. Third, a permanent bridge must be built between educational institutions and the industrial sector.

On technical education, there’s much to learn from Germany, Korea, Singapore and Vietnam, where industry is embedded in the training system. Our technical institutes need to be connected to local industry, export sectors, construction, agro-processing, IT, healthcare, renewable energy, light engineering and logistics. The path from training to a job, or to self-employment, must be made clear.

We also have to think about the international labour market. Many Bangladeshi workers who go abroad end up in low-skill jobs, earning little and bearing high risk. If we can deliver internationally benchmarked training in languages, technology, healthcare, the care economy, construction technology, machine operation, electrical work, welding, plumbing and renewable energy technology, the quality of remittance inflows can be transformed. Education reform, therefore, must be wired not only to domestic employment but to the global labour market.

What steps are needed to create new jobs? And how far can the budget support that effort?

Unemployment in Bangladesh isn’t just a numbers problem — it’s a problem of quality. Many young people can’t find work at all. Many more end up in jobs that pay little, offer no security and give them almost no scope to use their skills. Educated unemployment is especially worrying. Every year a huge cohort of young people enters the labour market, yet the economy is failing to generate enough decent jobs to absorb them. The roots of this are sluggish investment, a lack of industrial diversification, the skills deficit, the high cost of doing business and persistent policy uncertainty.

To create jobs, private investment has to be revived. The budget can play a central role in that. The tax regime must be made simpler and more predictable, cheap finance must reach small and medium-sized enterprises, and the basics such as power, gas, land and logistics must be secured in industrial zones. Incentives are needed for investment in new sectors. Ready-made garments will remain important, but one sector alone can’t carry the entire weight of the labour market. Agro-processing, pharmaceuticals, light engineering, electronics, IT-enabled services, care services, logistics, tourism and renewable energy all hold significant jobs potential.

The budget could also deploy employment-linked incentives. A firm that hires new workers and trains them might, for example, receive tax concessions or partial wage support. Special schemes could target women and young people. Micro-entrepreneurs, the rural non-farm sector and startups need easy credit, market connections and digital services — and not just loans, but an environment in which a business can actually stay afloat.

Government projects should treat employment as a performance indicator. We need to track how many local jobs an infrastructure project creates, whether it builds skills and whether it brings in local suppliers. Labour-market information systems need a serious upgrade too. Without reliable data on which skills are in demand, where jobs are emerging and which districts have surplus labour, employment policy will stay blind. The budget cannot fix everything, but applied correctly it can be a powerful lever for job creation.

Which reforms should take priority in industrial policy, the tax structure and one-stop service delivery?

Attracting foreign investment to Bangladesh isn’t simply a matter of infrastructure. Policy unpredictability, a tangled tax regime, bureaucratic delays, difficulties in securing land, drawn-out approvals, obstacles to repatriating profit and weak contract enforcement all discourage investors. Many foreign firms regard Bangladesh as a market of promise but judge the execution risk to be too high. Changing that perception demands concrete improvements on the ground, not just promotional rhetoric.

Industrial policy must put export diversification at its centre. Policy incentives are currently heavily skewed towards ready-made garments. Sectors with comparable potential — pharmaceuticals, agro-processing, leather and footwear, light engineering, electronics, jute products, shipbuilding, IT and digital services, renewable energy equipment — need to be treated with equal seriousness. Incentives should be allocated on the basis of productivity, technology upgrading, employment generation, export potential and environmental performance, not historical entitlement.

Tax structure requires deep reform. Frequent rule changes, advance tax, withholding tax, a convoluted VAT system and high import duties all inflate the cost of doing business. High tariffs on intermediate goods, in particular, raise production costs and erode export competitiveness. The tax framework must be made simple, transparent, digital and genuinely investment-friendly. The full list of exemptions and incentives should be published, and each one evaluated to separate what works from what doesn’t.

The one-stop service is a sound idea that hasn’t yet been implemented. Too many approvals still sit with separate ministries, directorates and agencies. An investor may submit a single application only to find that the decision rests with multiple offices, turning the one-stop into just one more stop. To fix this, the authority, procedures and information systems of the relevant bodies must be integrated. A deemed-approval mechanism, where permission is automatically granted once a deadline passes, could be considered, with the obvious safeguard that genuinely high-risk sectors still receive proper scrutiny.

Above all, accountability is the most crucial element. Data on how long each agency takes to process approvals, where files are stuck and why delays are happening should be made public. An effective grievance-resolution mechanism for investors is essential. Customs, tax administration, land registration, environmental clearance, utility connections, company registration and profit repatriation all need to be digitised and subject to strict time limits. Investment will flow into Bangladesh when investors see that the rules are clear, decisions are fast, costs are predictable and contracts are secure.

[This interview was originally conducted in Bangla and published in both the Print and Online editions of Bonik Barta. It has since been translated for the English edition.]