Is ‘development-wonder’ heading towards ‘development-disaster’?

We have been noticing over last six months that different rating agencies are downgrading Bangladesh in credit ratings. These ratings are coming at a time when Bangladesh has taken up the bailout package of International Monetary Fund (IMF). In the recent past Bangladesh was touted as a ‘development-wonder’ among international agencies. Now the question arises, is this story of ‘development-wonder’ moving towards ‘development-disaster’? We have to understand why such a situation has been created.

Firstly, a reign of oligarchic clientelism has been established here based on the state’s unilateral power of using force. Bangladesh's current economic structure is being set and run with a view to fulfilling the interest of that oligarchic clientelism.

Disaster in banking sector, dollar crisis and uncontrolled inflation has shown us the result of oligarchic clientelism. That means, an economic system of rent distribution has been created here to ensure the amassing of illegal accumulation of capital. To keep nurture this system, the state has ensured unilateral control on the financial organisations.

Secondly, the narrative of development has become static. Roads are being constructed but traffic jams are increasing at the same time. The cost of construction is the highest in Bangladesh. While the production capacity of electricity is increasing, the price is increasing too. Load shedding continues while capacity charge is increasing, dishing doll to the plant owners whether or not their electricity is used. Poverty is increasing in Dhaka city where spending is the highest. Inequality cannot be reined in. Many things are inflated in different economic indicators, which do not have any reality. Tax is less in proportion to GDP. The downward trend of different indicators is visible. There does not seem to be a way out from jobless growth. These factors are to blame for credit rating downgrade in Bangladesh.

There is no scope to raise any doubt regarding this. Bangladesh Bank itself is the client of these agencies, and receives information from them. There is no scope to consider these ratings through a political or geopolitical lens.

The reality is our institutions are not able to work independently. These institutions are working to ensure all sorts of perks to the rentier clientele. Forensic audit of financial institutions would reveal the level of irregularities that took place there. The bank managers are not able to work adhering to rules. They are in fact hostage to the directors of the banks, who actually control granting of loans. Such practice is increasing the amount of defaulted loans. We see the definition of defaulted loan is being changed at own convenience. Unfortunately interest rate increase or decrease is not being of any relevance to investment.

There is no scope to assess capability or incapability of any organisation if they are not allowed to work. Is the risk analysis of bank managers taken into consideration in disbursing loans? As I said earlier, directors determine everything. If the bank managers were allowed to apply that power, it certainly would work. The way the banks are working under the influence of a clique, the role of manager has become insignificant. All the initiatives to discourage good and efficient managers are in place. Creation of a skilled manager will become difficult in future.

Bangladesh's economy is dependent on the private sector. The credit rating forecast by international organisations certainly will have an impact on import-export trade. The most impact will have on the Foreign Direct Investment (FDI). FDI has naturally decreased to a great extent.

The ratio of the private sector investment in the GDP in the last one decade was stagnant, and has recently decreased further.  

When local and foreign investment is required now, the negative scenario of credit rating is like adding insult to injury. We should keep in mind that our growth is based on consumption till now. Investment driven growth is required for a sustainable growth trajectory. If this can be done, the pace of increasing employment and poverty alleviation will also be increased.

We are noticing foreign exchange reserves are gradually decreasing. No step has been taken to increase this. If statistics is taken into consideration, a huge amount of capital has been laundered through the import sector in 2021-22.  

On the contrary, USD 9-12 billion export income has not come to the country. As per shipment value, items worth 55.6 billion were exported at that time. But till June 2023, 43 billion have come. There is no news of 20 to 22 per cent. So money is being laundered both through export and import.

Foreign loans have increased by 322 per cent in the last 14 years. The amount of  loan was 23.5 billion in 2009 while the amount reached 99 billion in 2023.

On the one hand, money has been laundered through import and export sectors, while the amount of loan has increased on the other hand. The situation has deteriorated further due to the devaluation of money. Additional money is being required to pay loans. Dollar crisis cannot be tackled in any way. Under such a situation, the conditions of IMF cannot be fulfilled

The economic system afflicted with oligarchic clientelism has been established in the country. If this system is not changed, this situation will not change. By reforms, I mean abolition of the oligarchic clientelism system and rule. The problem is structural. The reforms like VAT reforms and interest rate 9-6 reforms will not yield any good results.

We have been hearing that prices are dropping in every country but not in Bangladesh. In fact, why the price is rising – this matter should be taken into consideration and initiative should be taken accordingly, or else there is no way to come out of the inflation crisis. Bangladesh Bank, the central bank, has the main responsibility to maintain the stability in commodity prices. But we see Bangladesh Bank is printing record amount of currency notes and lending to the government. The government is collecting revenue internally as expected, and what is being collected is not adequate for the government. The government needs more money to keep up the oligarchic clientelism. More money is being injected in the name of development of the partners of oligarchic clientelism, as well as capacity charge. As it has not been possible to take money from the banking system anymore, Bangladesh Bank is printing more currency and giving it to the government. How will inflation decrease if taka notes are being printed. Besides, the price of goods are being increased because of depreciation of the taka.

There is another reason – fixing of prices by the government. Food inflation has been the highest in our country over a decade. Prices are not decreasing in local markets despite the fall in international markets due to the government setting the prices. The government is not apparently allowing the market to operate on its own.

Bangladesh Bank is not unaware of who is responsible for the crisis of Bangladesh economy, who have committed the various irregularities. They also know what the remedies are. They can do many things because they have autonomy, but Bangladesh Bank is not using this autonomy. They are also becoming a part of oligarchic clientelism. I mentioned previously Bangladesh Bank is mainly responsible for maintaining the price stability, and through which, they are directly involved with people, but they could not establish this relation of trust with people.

But they failed to build this relationship of trust with the public. What’s more important than the governor as an individual receiving the grade ‘D’ is that Bangladesh Bank could not and still cannot utilise their autonomy. There seems to be enough reason to assume that Bangladesh Bank is rather busy with protecting the interest of loan defaulters and people involved with in looting.

Under the legal structure, there’s such an economic system employed in the country that mainly aims at helping out someone’s own 'community', to continue providing them with the opportunity of enjoying economic benefits through different tactics. And to do so, they are exploiting the development aspirations of the public. This situation has turned into a major threat for political stability and the economic sovereignty of the country. There is no scope here to consider political and economic reality separately. This situation has generated grave concern and uncertainty among the public.

Actually, those who establish this sort of monopolies always believe that they will be the ones to hold power. But, from experience I can say that those who acquired wealth at various times taking favours and illegal privileges from the state, ultimately failed to hold onto their position as businessmen or wealthy persons. The reason is that they don’t remain accountable either to their organisation or their employees. That’s why they fail to move forward. There are many such examples in our country. And regarding the monopoly, it can be said that this sort of system at one point crumbles from the inside. At least, that’s what the history says.