Political uncertainty, not smaller ADP, behind economic slowdown: Planning adviser

The current economic slowdown in Bangladesh is not primarily due to the reduced size of the Annual Development Programme (ADP), but rather the result of political uncertainty that has caused investment to stagnate, Planning Adviser Wahiduddin Mahmud said today (12 January).

“If investment had increased, a slightly lower ADP would not have created major problems. Employment and production could have continued at a normal pace,” he said while speaking at a press conference after a meeting of the National Economic Council (NEC).

The NEC meeting was held at the NEC Conference Room in Sher-e-Bangla Nagar, with Chief Adviser Muhammad Yunus presiding.

Wahiduddin noted that a positive development for the economy during this period has been a significant rise in remittance inflows. 

A large portion of remittances is going to rural areas, boosting house construction, retail trade, services, and small businesses. As a result, poverty pressure in remittance-receiving regions has been relatively lower, he added.

However, he pointed out that areas with little or no remittance inflow have been more adversely affected, as development projects progressed slowly and new projects were not taken up as much.

He also highlighted the impact of monetary policy, saying that the Bangladesh Bank kept interest rates relatively high for an extended period to curb inflation, which discouraged investment. 

“While large-scale investment decisions do not depend solely on interest rates and are more influenced by political stability and policy certainty, the situation is different for small and medium enterprises (SMEs),” Wahiduddin said.

Referring to a survey conducted by his office, the planning adviser said that the biggest obstacles for small and medium entrepreneurs are access to credit and the low-interest working capital. 

“Without low-interest loans, it becomes difficult for them to maintain normal business operations,” he said.

Although Bangladesh Bank has claimed to have provided special low-interest credit lines to banks for working capital financing of small entrepreneurs, Wahiduddin Mahmud said banks have tended to focus on sectors offering higher returns. As a result, SMEs have not received loans in line with expectations, despite central bank directives.

He added that if interest rates had been reduced earlier and more gradually, the situation could have been somewhat more manageable. 

“I do not think the economy will collapse completely,” he said, adding that Bangladesh Bank is currently operating with a relatively higher degree of independence in setting monetary policy.