Bangladesh's macro economy is rife with problems. Firstly, our propensity to make superficial comments without going deep into any issue. Secondly, the conservative nature of our economic studies in Bangladesh's colleges and universities. Thirdly, the inability to remain dispassionate in our economic reviews and research, that is, giving more importance to immediate popularity rather than the actual results and, above all, extreme political considerations in economic decision-making. And also, in this country we are all so closely interlinked, you can't really move without stepping on someone's toes.
Even if we don't take the finance ministry into consideration, there is a general perception that Bangladesh Bank has failed to play the role required by the central bank to keep the economy stable in the circumstances. Quite to the contrary, it has displayed inefficiency and failure in vital areas. The New York-based Global Finance magazine recently published a ranking where the governor of Bangladesh Bank was given a 'D' grade.
Bangladesh's inflation is more or less unreined, foreign exchange reserves have taken a nosedive, a dollar crisis prevails and the value of the taka against the dollar is on a downtrend. All this is complicating the economy. Analysts say, bringing down inflation, stablising the currency exchange rate, and reducing default loans are the three extremely important factors for the banking sector and the country's economy. Yet our central bank displays failure or inefficiency in all three of these areas. Many of the analysts also feel that 'political pressure and government control' also plays a role behind this predicament.
The analysts say that just as the central bank did not meet with success in bringing down inflation or tackling the foreign exchange crisis, it also failed to implement its own monetary policy. The central bank should make sure that its policy is in keeping with the market system. There is much inefficiency, and even limitations, in the case of resolving the problems related to inflation and implementing the monetary policy declared by the central bank. The central bank should pay attention to that. They also need to pay attention to the policies they are now following regarding the foreign currency crisis and the steady shrinking of foreign currency reserves. The multifarious crises in the banks are being highlighted in the media. The central bank has never been able to take effective measures about this dismal state of the banking sector.
We have long been hearing that the central bank cannot take decisions on its own accord on many issues including the banking sector. Most of the decisions come from political quarters. That is why a former governor recently remarked that the governor alone cannot be blamed. Many feel that the central bank does not really have independence. That is why they do not develop professionals either.
No one can even say with certainty whether it is at all feasible for an almost market-ignorant and people-alienated civil society or bureaucracy-dependent political system to resolve the fundamental problems in the true sense
Bangladesh's reserves have now become a concern for all and according to indications of IMF and other international agencies, there are apprehensions that the reserves will fall to 20 billion dollars by the end of the year. Economic growth has also decreased, as a result of which bank deposits have decreased too. Problems have cropped up in balance of payments too. Revenue is not increasing; to the contrary, it is proportionately decreasing. Remittance isn't coming in. Reserves aren't increasing. Also, due to political reasons, the central bank is not being able to carry out even the minimum of reforms.
According to news reports, central bank officials have said the steps they have taken may not seem appropriate to everyone, but the central bank took circumstances and reality into consideration when formulating these policies. In recent times we have seen the central bank has started consulting with experts regarding their plans and policies. The main aim of this is, perhaps, to rapidly reduce inflation and stimulate the economy once again.
In its report, the Global Finance magazine basically identified the biggest weakness of Bangladesh Bank as the structural weakness of the economy and the government's control over the central bank. It is basically for this that the Bangladesh Bank governor was given the 'D' grade. Earlier, from 2012 to 2014, the Bangladesh Bank governor had received the 'C' grade. In 2015, the governor at the time scored a 'B-'. Then with the reserve heist of 80 million dollars, that governor had to resign. The next governor's grades wavered between 'B' and 'C', and sometimes even 'D'.
Even before it came up with the monetary policy, the central bank did consult with experts and now they are sitting with them again to see if the bank made mistakes anywhere, or whether the manner in which the bank is proceeding is correct or not. We have learnt that the bank is working on three challenges now -- bringing inflation down, stabilisng the exchange rate and bad loans.
Many are of the opinion that there is no direct remedy to any crisis in the economy. The central bank takes everything into consideration when drawing up their policies. This may be compatible with some people's views, and not compatible with others. The central bank tries to do whatever seems to be best at the time. But at the same time they are unable to answer the questions as to why so much money is moving through 'hundi', why the foreign exchange rate was held back for so long, why while many similar countries put up interest rates to control inflation but our central bank forcefully kept interest rates down or why they didn't take any measures against money launderers or loan defaulters. There are no answers either to the questions about why they look up to the government's highest office even regarding minor issues.
No one can even say with certainty whether it is at all feasible for an almost market-ignorant and people-alienated civil society or bureaucracy-dependent political system to resolve the fundamental problems in the true sense.
* Mamun Rashid is an economic analyst