The cost of avoiding reform will be high: Salehuddin Ahmed

Reforming the banking sector and the revenue sector is very important for the sake of the economy, and indeed the country. Although amendments to the Bank Company Act and the Bangladesh Bank Order could not be completed, the interim government issued two ordinances as part of reforms in both sectors. One is the Bank Resolution Ordinance, and the other is the Revenue Policy and Revenue Management Ordinance.

The new BNP-led government can amend these if it wishes. We have already seen that the government has started working on amendments to the Bank Resolution Ordinance. Work on amending the Revenue Policy and Revenue Management Ordinance can also continue. But under no circumstances would it be reasonable to step back from reform initiatives in both sectors.

These reforms are linked to the ongoing loan programme with the International Monetary Fund (IMF). Even if they were not linked, reforms in both sectors would still be necessary. There were complications in carrying out reform in the revenue sector.

We faced bureaucratic obstacles. To be honest, bureaucrats did not want it. But we have seen that many people do not pay taxes despite having the capacity. Those who impose taxes also conduct hearings and eventually grant waivers. This system is not right.

That is why we separated the policy-making and implementation functions. It is true that we did not hold extensive discussions in doing so, and we had to face criticism for that.

Businesspeople tend to focus mainly on their own interests—they simply say, reduce taxes. But if taxes are reduced, how will the government function?

As for the Bank Resolution Ordinance, five Islamic banks were merged into one. There was no better alternative. Both issues will be discussed at the upcoming Spring Meetings of the World Bank and the IMF.

One thing to remember is that the IMF reviews macroeconomic stability. If the indicators in that review report are positive, then all development partners—including the World Bank and the Asian Development Bank—provide financial support.

Due to the impact of the Middle East war situation and the need to fulfill the new government’s electoral commitments, a large amount of funding is required. Therefore, discussions with the IMF at the Spring Meetings must be handled carefully.

In my opinion, the programme should remain ongoing. And under any consideration, reform efforts must be carried forward. It is also true that if reforms are not carried out, we will have to pay a price too heavy.

* Salehuddin Ahmed, economist and former finance adviser to the interim government