They said if the government resorts to borrowing from banks in order to minimise such a loss, a liquidity crisis will also be created in the financial market.

They were speaking at a post-budget discussion titled 'Budget and the Financial Sector' organised by Citibank NA in Dhaka.

Director of Centre for Governance Studies of BRAC University Dr Akbar Ali Khan, Securities and Exchange Commission (SEC) Chairman Faruque Siddiqui, President of Association of Bankers Bangladesh (ABB) M Aminuzzaman, Chief Executive Officer of IDLC Anis A Khan, Managing Director of Nescafe Carlo Cifiello and Country Officer of Citigroup Mamun Rashid took part in the discussion, among others.

Conducting the session, PKSF Managing Director Fakhruddin Ahmed voiced caution against dependence on bank borrowing and said, "For this, disbursing credits of the banks to the private sector will be reduced, resulting in a reduction in employment generation and a disruption in the economic and GDP growth as well."

Fakhruddin, also a former Bangladesh Bank governor, was critical of continuation of the provision of whitening black money year after year.

"If it is not possible to give specific directives in the budget regarding the losses of SoEs or energy price or power crisis, the government should have taken indirect steps," he suggested.

Referring to the finance ministry's report on losses of SoEs that said total loss incurred by Biman and BPC stood at around Tk 4,500 crore, Dr Akbar Ali Khan, also a former alternative executive director of World Bank, suggested that any bank borrowing to cover up these losses would not only affect the financial sector seriously, but also force the banks to raise their interests both on loans and deposits.

"In the proposed budget it was not also hinted that how the big amount of losses will be addressed," Khan said.

"In the last couple of years the BPC has incurred a loss of around Tk10,000 crore which is managed from bank borrowing," he said.

Khan lamented that the government had taken a disorganised policy in fixing up the price of energy. "As the price of energy will remain higher in the next few years, the government should formulate an energy policy to handle the issue," he said.

He further said in the post-budget reaction everybody was critical of the short-term issues. But, there are also various mid-term and long-term issues in the budget, which were not discussed by trade bodies and even political parties.

But, he said, after the election the new government will face a great challenge in addressing the issues.

UNB adds: SEC chairman Faruque Siddiqui said, "The Tk 15,000 crore bank loan, of which Tk 5,000 crore has been defaulted, will create liquidity crisis that encourages the government to go for short-term borrowing."