Planning Adviser Dr. Wahiduddin Mahmud revealed on Wednesday that the government was forced to print thousands of crores of taka in new banknotes to prevent a total collapse of the country’s banking sector.

Speaking at a seminar titled "Economic Stability and Challenges for the Next Government," organized by the Economic Reporters' Forum (ERF) on January 28, the Adviser detailed the severe fiscal pressures currently facing the administration.

Unseen Liabilities and Capital Flight
Dr. Mahmud explained that the government had to provide massive "invisible compensation" due to several critical factors:

• Bank Ownership Issues: It has been impossible to recover losses from certain bank owners who fled the country, as they held no actual shares.
• Fuel Debts: The government had to clear approximately $5 billion in outstanding dues for fuel imports.
• Labor Support: Significant funds were diverted to pay months of wages for workers at closed factories.
• Money Laundering: Extensive capital flight from the banking sector further strained national reserves.

Debt-Driven Development and the "Debt Trap"
The Planning Adviser noted that current tax revenues are barely sufficient to cover the government's operational expenses. Consequently, development projects are almost entirely dependent on domestic and foreign loans.

"A small portion of foreign aid goes to education and health, but the lion's share is spent on foreign consultants," Dr. Mahmud stated. "This is why we have scrapped such projects. Otherwise, we risk falling into a massive debt trap through indiscriminate foreign-funded initiatives."

Shift in Monetary Policy
Addressing inflation and interest rates, Dr. Mahmud signaled a shift away from aggressive tightening. He suggested that the rigid stance of maintaining high interest rates to curb inflation is no longer strictly necessary.

While noting that inflation has not decreased as sharply as expected, he emphasized that the trend remains downward.

He concluded by stating that the economy has entered a "new reality," and a full return to previous economic conditions is no longer possible.