The ‘good’ economy has turned bad overnight. Finance minister AHM Mustafa Kamal has now admitted that the economy is not in a good shape. He has also accepted that the banking sector is also faring poorly and there is a downtrend in imports and exports.
Yet just a day ago the finance minister had said in parliament that only exports were doing negatively. He said that other than that, we were not lagging behind in a single sector.
While the finance minister made this sweeping statement, Bangladesh Bank, Bangladesh Bureau of Statistics (BSS) and the Export Promotion Bureau (EPB) gave quite an opposite picture. These three organisations, quite to the contrary, said only one sector was doing well.
The finance minister gave no reason for his overnight volte face. On Thursday he twice made statements about the economy, finally admitting that the economy was not doing well. However, he was hopeful that this would be overcome by the year end. He had, however, no explanation about how things would improve.
Former chief economist of World Bank’s Dhaka office, Zahid Hossain, speaking to Prothom Alo on Thursday, said at least the finance minister had admitted that the economy is doing badly. But his statement that things will turn up by the end of the year, cannot be taken on face value. This has to be proven. And before proving this, the government has to fix its mind. And there must be an end to favouritism.
- Why default loans are on a rise
The finance minister was speaking at the Bangladesh Development Bank Limited (BDBL) branch managers’ conference held on Thursday at Motijheel in the capital city. He also mentioned the increase in default loans, though this was not the first time he did so. On December last year, 11 months after taking over as finance minister, AHM Mustafa Kamal admitted this. Prior to that he had maintained that there would be no increase in default loans. The more he said this, the more the default loans increased. When these statistics were pointed out to him, he moved away from that stance.
At Thursday’s programme, the finance minister blamed the banks for the growing default loans.
He said, “The country’s economy is in a bad condition. The banking sector is not in a very good shape either. If the banks were faring well, then these would not have to be merged. There are many discrepancies in the banks for which default loans have increased.”
Addressing the bankers, the minister said, “I am criticised in parliament because of you. You tell me, is this because of me or because of you?” He went on to say that not all bankers are bad, only some are. He said that before Bangladesh Bank or the finance ministry took action, the bankers should take action themselves.
While the finance minister solely blames the bankers, this view is not completely shared by economists or bankers. They blame the repeated clemency granted to defaulters, lack of monitoring, the clout of deliberate defaulters and political patronage.
Former deputy governor of Bangladesh Bank Khondokar Ibrahim Khaled, speaking to Prothom Alo, said that as a businessman, the finance minister is basically upholding the interests of the bank owners. Whether it is in private banks or state-owned banks, the bank management authorities cannot sidestep the owners and provide loans. It is not good to protect the bank owners and place the blame on the bankers.
- No one is in a good shape
At the conference on Thursday morning, the finance minister said that it was not just in Bangladesh alone, but globally imports and exports were faring poorly. In the afternoon, speaking to newsmen in the secretariat, he said export revenue in Thailand had fallen by 6 per cent, in Malaysia by 2.5 per cent, in Vietnam by 14.3 per cent, in England by 3.3 per cent, in the European Union countries by 1.8 per cent and in India by 1.3 per cent. And in Bangladesh exports had fallen too.
The finance minister also said that several opposition members in parliament on Wednesday had criticised the flight of capital. He asked, how do they know that so much money is being siphoned out of the country?
However, the Washington-based international agency, Global Financial Integrity (GFI)’s latest report published in January 2019, stated that over the past 10 years (2006-2015), 63.09 billion dollars or Tk 5.3 trillion had been laundered from the country.
President of Dhaka Chamber of Commerce and Industry (DCCI) Shams Mahmud told Prothom Alo, “It is true that there is a slowdown in the global economy and it will have an impact on us. But there are many issues that are not related to global economy. We are not being able to fix those. There are, for instance, many mega infrastructural projects. There would have been no funding problems at all for these if the government had taken Dhaka chamber’s recommendation for infrastructure bonds. But the government took no initiative in this regard.”
- Anger and regret
The finance minister said he was hurt by the criticism from opposition members in parliament on Wednesday concerning the bill proposing a percentage of the surplus funds from autonomous and semi-autonomous organisations being taken for the state coffers.
He said that one of the parliamentarians had referred to him as a businessman. “I was a businessman, I was a professional and a certified chartered accountant. The late finance minister M Saifur Rahman had been a chartered accountant too. But I had been a businessman 12 years ago. Running a business is not a crime.”
The finance minister regretted having lost his temper in parliament on Wednesday. “I never lose my temper, but I lost it briefly that day. They did not mention even for once that I am the world’s best finance minister.”
The finance minister said that taking funds from the autonomous and semi-autonomous corporations for the state reserves was not an ill-motivated move and that this would have a meaningful impact on the economy. He said this was being done to restore financial order in the corporations.
Speaking to Prothom Alo about overall economic state in the country, economist Zahid Hossain said that the economic management was not good. The government’s steps to cut down on default loans were having an opposite effect. The private sector was being deprived by the increase in government borrowing. Then there was waste. There were many projects being implemented in the name of development, which would be better not to have been taken up at all.
He said that while Thailand, Malaysia and other countries were seeing a downturn in exports, they did not have the waste and bureaucratic complicacies that exist here.
“There is a fall in revenue income. The Electronic Fiscal Device (EFD) is yet to arrive. There are vested interests behind all this. Unless all this is stopped, we can hardly expect anything good by the end of the year,” he said.
- This report appeared in the print edition of Prothom Alo and has been rewritten in English by Ayesha Kabir