Most economic indicators of the country have taken a downward turn at the moment. Several economic indicators including revenue collection, inflation, unemployment, private investments, capital equipment import, capital market and foreign investment, are not showing any good signs. However, remittance has increased. There are also some good indications regarding the country’s forex reserve.
Centre for Policy Dialogue (CPD) came up with this review in a press conference held under the title of “Bangladesh Economy 2024-25, Challenge of Fulfilling Expectations in Crisis Time” at the agency’s office in the capital’s Dhanmondi on Wednesday.
CPD executive director Fahmida Khatun presented the keynote in the press conference. She said a country cannot attract domestic and foreign investment unless there is political and institutional stability. Therefore the main target of the interim government should be creating a conducive environment for the election as soon as possible. No government can sustain long without public mandate. Therefore the upcoming election should be held within the timeframe (within December this year to June next year) announced by the interim government. She said economic reform is not possible without political reform.
CPD said the growth rate of revenue collection as of October was only 3.7 per cent, which was 17.7 per cent at the same time previous year. It means that there has been a notable decline in revenue collection. The inflation rate is still above 10 per cent. The private companies are not confident to invest taking loans amid the prevailing uncertainty. Besides, loan costs also soared up. Import of capital equipment also saw a significant fall in the four months prior to the month of November. The amount of foreign investment is also declining.
The CPD says the business sector was mired in multifaceted problems during the rule of the previous government. A long term initiative is needed to solve most of the structural challenges.
CPD further said it has been six months since the interim government took over. Six months is not enough time to bring any major change. However, the government needs to improve the law and order situation and widen the social safety net programme. The government also should explore the possibility of reducing the price of energy and enhance gas exploration programmes to ensure gas supply in the industrial sector.
Inflation
CPD feels the interim government could not take any effective initiative to prevent extortion and stockpiling to bring the prices of daily essentials under control. CPD says they failed to curb daily essential prices as it could break the network of the middlemen and the trend to set an irrational price.
The research institution also talked about the government decision to increase VAT. Referring to this, CPD distinguished fellow Mostafizur Rahman said, “The decision to increase VAT was taken when the common people were already suffering due to the high inflation rate. The inflation is now double the income. The interim government had the chance to increase direct taxes. However, the government did not take that path. They are stressing on indirect taxes.”
He further said the government does not get all of the money from the tax paid by the people. The interim government had opportunities to work on these matters. But it didn’t. The International Monetary Fund (IMF) did not ask for increasing VAT. It asked to raise revenue. However, instead of increasing direct tax, the government is increasing indirect tax which creates more pressure on common people.
CPD also brought up a chart comparing the price of daily essentials in Bangladesh and the global market. The average price of soybean oil in the global market was Tk 128 per litre as of December. However, the price was Tk 168 in Bangladesh at the same time. Similarly, the price of sugar was Tk 126 per kg in Bangladesh while it was Tk 41 in the markets under the European Union.
The CPD also conducted an investigative survey on the rice market. It shows the price of rice is Tk 33 at production level. However, the price of the same variety of rice is Tk 65 at retail. It means the price of rice doubles from farmer to consumer level. Prices increase as the product changes hands. The rice mills make the most profit.
CPD against keeping banks artificially operational
According to data from the Centre for Policy Dialogue (CPD), the country’s defaulted loans stood at Tk 2.85 trillion as of last September. This amount is nearly three times the total allocation for the education and health sectors in the current fiscal year’s budget. The performance of many banks continues to decline due to weak institutional structures, while political interference has further eroded the independence of Bangladesh Bank.
The CPD has proposed several measures to address the challenges facing the banking sector. It suggests that weak banks should be merged with stronger ones to stabilise the industry. Additionally, limits should be set on the maximum loan amounts that borrowers can receive. Banks that are financially unsustainable and kept operational artificially should be shut down. The organisation also recommends dissolving the Financial Institutions Division under the Ministry of Finance.
Furthermore, the CPD calls for accountability regarding the misdeeds of former governors of Bangladesh Bank and urges the publication of the investigation report on the central bank’s cyber hacking incident. It also emphasises the need to prevent government officials from being appointed as governors of Bangladesh Bank.
The CPD asserts that meaningful banking sector reforms are impossible without strong political commitment, as powerful vested interests continue to obstruct necessary changes. Strengthening the sector requires decisive political will.
Request for documents of power contracts denied
Fahmida Khatun stated that the current government had promised to make power purchase contracts public, but these contracts have yet to be disclosed. Recently, the CPD submitted a request under the Right to Information Act for documents related to 28 power plants from the previous government.
However, the interim government denied the request, citing concerns that releasing the information could pose a threat to national security.
CPD Research Director Khondaker Golam Moazzem, Research Fellow Muntasir Kamal, Syed Yusuf Sadat, and others were present at the press conference. CPD also emphasised that delaying Bangladesh’s transition from the Least Developed Country (LDC) category would not be the right approach.
Instead, the country should focus on preparing for the transition. In South Asia, all countries except Afghanistan have already moved from LDC to developing country status. Falling behind would not be a viable option for Bangladesh, as the nation meets all three required indicators for LDC graduation.
When asked about the increasing number of demands being raised since the interim government took office, Mostafizur Rahman acknowledged that many of them are reasonable.
However, he pointed out that the interim government may lack the capacity to address all these demands, mainly due to the country’s low revenue collection rate. He also noted that there has been little sign of the necessary initiatives to improve revenue collection.