The seasoned economists have called into question the initiative to bring back the laundered money and increase the number and tenure of bank directors from the same family.
Mustafizur Rahman, distinguished fellow of the Centre for Policy Dialogue (CPD), sought to know who prescribed these policies, saying that these are acceptable under no standards, including moral, economic and political.
He came up with the statement on Saturday while addressing the closing session of a three-day annual development conference organised by the Bangladesh Institute of Development Studies (BIDS) at the Lakeshore Hotel in Dhaka.
Mustafizur Rahman said, “We are talking about the bank defaulters. But who prescribed the rule that a bank can have four directors from a family, instead of two. Who gave the idea of making the rule that these directors can stay in their positions for nine years, instead of six.”
He also questioned the scope to bring the laundered money back with a 7 per cent tax and sought to know about the initiative's outcome.
“It is said that around Tk 7 billion is siphoned off abroad every year. There would have been no crisis in our reserves had this money been in the country. Then, who gave these ideas to the government?,” he added.
Mashiur Rahman, economic affairs advisor to prime minister Sheikh Hasina; Tawfiq-e-Elahi Chowdhury, her energy advisor; Salman F Rahman, her private industry and investment advisor; and Ahmed Kaikaus, principal secretary of the prime minister’s office (PMO) attended the event as guests. But, they did not respond to the questions arisen by the CPD distinguished fellow.
No interest rate hike right now
The BIDS director, Binayak Sen, drew the attention of Salman F Rahman to the current 6 and 9 per cent interest rates and requested to disclose his view on the issue.
Salman said the textbook solution that a higher interest rate reduces inflation cannot be applied in all cases. The government is trying to manage the situation by controlling imports and buying dollars.
Each country takes decisions as per its own situation and Bangladesh is also doing so, he said, adding that inflation is finally coming down here.
Salman F Rahman further said the local businesses will face multifaceted effects if the interest rate is raised. No industries would manage to survive with an interest rate of 16-17 per cent.
Mashiur Rahman said the interest rate is fixed taking into consideration the country’s overall savings situation as well as inflation. A low interest rate may misplace the investments often. He also said a high volume of defaulted loans reduces the effectiveness of the banking sector.
Regarding the currency exchange rate, he said the rate should not remain unchanged for long. Rather, it should be revised after every three or six months.
Tawfiq-e-Elahi Chowdhury referred to the much discussed issue of subsidy and said the authorities provide subsidies in the case of a competitive market. Why will this issue come up when there is no competition?
The developed nations increasingly talk about the subsidized sectors. They themselves are now providing subsidies to different sectors amid the current crisis, he added.
Budget irrelevant amid crisis
Another distinguished fellow of the CPD, Debapriya Bhattacharya, believes that the current budget has become completely irrelevant in the prevailing economic context. He said, “Five months into the fiscal, I see that the policies that were taken or the goals that were fixed have changed.”
He is not in favour of holding the Ukraine war responsible for all these crises. Debapriya said, “It is not right that today's problem is due to the Ukraine war. It is actually just a fragment. Some inherited economic problems, such as low tax-GDP, low effectivity of government spending, weak energy sector, and debt repayment of mega projects, have made the current crisis difficult to deal with.”
Atiur Rahman, former governor of Bangladesh Bank, said, “The government is working to overcome the economic challenges, but this belief was not created in the market. I think we should publish credible information to inform the people where we are, what we are doing and where we are going.”
Two IMF conditions
The media reports described various conditions of the International Monetary Fund (IMF), but the secretary of economic relations division (ERD), Sharifa Khan, mentioned two conditions - raising the tax-GDP ratio and leaving the exchange rate to the market.
“We will start receiving budget support from the development partners by next March. A USD 250 million budget support agreement will be signed with the Asian Infrastructure Investment Bank (AIIB) next week. Our debt repayment capacity is quite good now,” she added.
Planning secretary Mamun Al Rashid said currently there are projects involving Tk 2480 billion. The figure will stand at Tk 1200 billion if the fuel expenses are excluded. There is nothing to worry about the mega projects and no new projects are in the pipeline.
Clients withdraw Tk 500 billion from banks
Ahmed Kaikaus said the clients have withdrawn Tk 500 billion from the banks following a rumour that there is no money in the banks. The banks have been successful to pay all and the clients have started depositing money again. A vested quarter is spreading panic over the macro economy.
Regarding the IMF, he said an IMF delegation came a few months ago and offered Bangladesh loans. The government agreed with the proposal as a kind of tension prevails here over the greenback.
Gas-electricity crisis
FBCCI president Jashim Uddin said, “We are still having problems with gas. If the industries do not increase production, the dollar-crisis may intensify.” He suggested a reform in the revenue board and described it as imperative to gear up tax collection.
Bangladesh Chamber of Industries (BCI) president Anwar Ul Alam Chowdhury said the commodity prices soared following a hike in the fuel price. It is a management problem. Money enters the country through hundi via bKash, Nagad and other means. A strict action here would push up the dollar inflow.
He further said the banks are seeking income tax certificates, which is creating a panic among the people. All these issues translated into a liquidity crisis in the banks. The people are keeping their money under their pillow, but do not turn to the banks.
Salman F Rahman said the government has already started a discussion with the business groups regarding the energy crisis. Traders are also willing to buy fuel at a higher price.