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Planning Minister MA Mannan on Saturday claimed that despite the nation’s economy being surrounded by dark clouds, there remained a ray of hope.
“There have been many changes in people’s lifestyles which are impressive. As a conscious citizen, we must admit it,” he added.
He spoke as the chief guest at an event titled “Economy in Crisis; What Should be the Work Plan?” organized by the Centre for the Policy Dialogue (CPD) in the capital on Saturday.
“Our goals now are very specific — eradicate poverty, eradicate hunger and eradicate backwardness. These problems have not arisen suddenly, but were inherited from those ancestors which may tail to British rule. Our goal is to get out of this crisis,” he added.
He noted that although the rate of fall was slim and not lowering as predicted, the fact that inflation was declining was unquestionably encouraging. Inflation has been declining for the past four months.
“CPD and other think tanks have recognized that our growth continues along with the IMF, World Bank and ADB,” he further said, adding that he respected the efforts of researchers as they were finding the gaps, and the government was working accordingly.
“We have a lot of improvements in the field of education and power generation, but we admit that we have yet to reach the goal completely,” he added.
Rehman Sobhan, chairman of the CPD, chaired the event, while Fahmida Khatun, executive director of the CPD, presented a report titled “Independent Review of Bangladesh’s Development (IBRD): Managing the Economic Crisis and CPD’s Policy Recommendations.”
Problems
She concentrated on the state of the following economic factors in the report: inflation, Bangladesh’s external sector, which is experiencing unprecedented pressure and needs to be redirected, a crisis in the power and energy sector, which she addressed with a few proposals from a clean energy perspective, the banking sector, and the fiscal balance.
The Covid-19 outbreak, the Russia-Ukraine war, and the ensuing supply chain disruptions, among other outside factors, she claimed, had made a number of persistent structural flaws in the Bangladesh economy worse.
The report’s part on inflation noted that Bangladesh was currently under intense inflationary pressure, which began long before the Russia-Ukraine situation escalated.
Domestic factors such as market distortion by a few dominating businesses and weak monitoring have also contributed to the ongoing price increase.
Several necessities, whether they are produced locally or imported from a developed country are costlier in Bangladesh than in other developing or developed nations.
Low-income households are finding it difficult to control their spending as the burden of rising prices grows.
Many households, especially those whose members earn minimum wages in practically every sector of the economy, struggle to make ends meet.
The research recommended that the Bangladesh Competition Commission’s function be expanded, particularly in light of the market for basic consumer goods.
The Commission needs to create a database, keep tabs on the activities of the leading market actors, investigate any market control or manipulation and take appropriate action.
The Minimum Wage Board should also take into account raising the minimum pay across the board so that workers making the minimum wage can at the very least buy basic nourishment.
Private sector corporations should consider a higher salary increment during times of high inflationary pressure since workers are having to compromise their standard of living.
Moreover, the government should provide direct cash support to the poor, enhance social protection for low-income families and extend stimulus to small businesses for their survival during difficult times.
Regarding the banking sector, the report said that the sector continues to suffer from various challenges for several years.
High loan default and poor performance in other indicators are the manifestations of a weak banking sector.
Due to poor governance and lack of reforms, the banking sector exhibits its fragility which poses risks to the economy.
Unfortunately, the government’s promises for strengthening the banking sector are still unfulfilled.
Regarding non-performing loans (NPLs), the report said that the total volume of NPLs has increased by more than three times in the last 10 years since 2012.
The NPLs increased to Tk1,34,400 crore in the first quarter of the fiscal year 2023 from Tk42,730 crore in the fourth quarter of FY2012, as per the report.
However, actual NPL will be much higher if loans in special mention accounts, loans with court injunctions, and rescheduled loans are included.
The CPD mentioned that appointments of bank directors based on political connections, loans sanctioned on political grounds, rescheduling of loans despite the poor record of repayment, and writing off loans to reduce the tax burden and clean balance sheets of banks are among the reasons behind the high volume of the NPLs in the country.
Besides, the weak internal control and compliance risk management of banks, lack of independence of the Bangladesh Bank, dual regulation by the Financial Institutions Division and the central bank as well as flexibilities given to defaulters by the central bank are also responsible for the high volume of the NPLs, it said.
External factors not solely to blame
In his speech, Shamim Haidar Patwary MP, said that the current crises cannot be blamed solely on the Ukraine War or Covid-19.
“Money laundering, stock market collapse, and defaulted loans are playing a role behind this. There is a cycle involved with illegal earning and money laundering consisting of bureaucrats, businessmen and politicians,” he added.
It has to be reformed or the whole system will collapse, he added, saying that the government should take initiative to bring back the smuggled money.
“To get some dollars quickly, we need to focus on remittance by expanding incentives on remittances by giving some benefits related to visa and passport fee waiver, embassy-related issues etc,” he added.
There are enough social safety nets but the country needs to skill development of the beneficiaries.
Moreover, the government should take initiatives in order to restore confidence in the banking sector by doing something visible, an all-party monitoring commission and banking commission can be established.
Former Bangladesh Bank governor Salehuddin Ahmed said that the current crisis is not a sudden occurrence, it is a legacy problem.
“The bank still has time to take a strong stand, if it does, the problem will continue to grow,” he added, saying that the exchange rates should be unified.
Moreover, monetary policy should be done for six months instead of one year.
“Three points must be emphasized; increasing capacity, ensuring transparency, and good governance,” he added.
Executive Director of Policy Research Institute Dr Ahsan H Mansur said that deposits in Brac Bank grew 27% in the last month as people are looking for good banks for the safety of their money.
To win over the public, he claimed, severe and exemplary punishment for lending scams is required; but, appointing an observer is insufficient.
Mansur also said that inflation was not created by external effects, domestic demand and GDP are growing and it does not match with the economy.
In his welcome speech, Rehman Sobhan said that the purpose of the IRBD is not to critique government policy but to enable public discussion of policy by stakeholders.
It also works to establish measures of accountability and most importantly, make constructive comments which will be helpful to the policy-making process.
“So, essentially you should never view these exercises as adverse aerial but essentially as part of institutional collaboration between state and civil society,” he added.
Rupali Haque Chowdhury, managing director of Barger Paints, Nasir Ejaj Bijoy, CEO of Standard Chartered, labour leaders, representatives from the central bank, and various professionals also spoke at the event.
(DT)
