Home Bangladesh Financial sector now most vulnerable
Bangladesh - June 12, 2024

Financial sector now most vulnerable

Mahfuja Mukul: Prominent economists of the country said that the budget of the next financial year should be seen in the context of the overall economic crisis. Most urgent to overcome the crisis is to reduce the financial sector distress and increase the revenue in proportion to the size of the economy. Because the financial sector, the main sensitive area of the economy, is now the most vulnerable.
According to them, due to revenue shortfall, the government’s borrowing has increased greatly and the repayment pressure is increasing. In this, the government is not able to spend more on public welfare sectors like education, health, social security. As a result, the overall economy is in a fragile situation. A transition from this situation calls for bold reforms in the revenue and financial sectors and requires political commitment at the highest level.
Professor Wahiduddin Mahmud, advisor to the former caretaker government and prominent economist, said that the chaos in the banking sector has reached an extreme level. The most sensitive financial sector of the economy is now deregulated and unprotected. The banking sector is at risk due to irregularities, corruption and mismanagement. Various loyal interest groups have been given unfair privileges by banks, with power politics involved. In such a situation economic management collapse, the investment environment suffers and honest entrepreneurs are deprived.
Some sensitive sectors, including the financial sector, must be kept away from power politics in order to overcome the situation.

He said, the country has gone towards an unethical economic system. Smart Bangladesh is being talked about. If a smart man is unprincipled, he can be terrible. Economics must be brought back into morality. Corruption exists in all countries. However, the way you have to pay extra money to get any government service is not seen much in other countries. Again, the service takers take various unfair opportunities including revenue evasion.
He said that the necessary reforms were not done during the good times of the economy. Again, lack of accountability at all levels of administration, irregularities-corruption and massive wastage in government expenditure. There is free circulation of black money and money laundering abroad. As long as the economic indicators were good, the burden of these irregularities, mismanagement and wastage remained covered. The economy also had the power to digest these. Now that is not the case. As a result, there is a need for short-, long- and medium-term guidance to overcome the crisis. He advised journalists to inquire about the loans from which countries against big projects.
Wahiduddin Mahmud said, if timely steps are not taken to control inflation, it will get stuck. If the buyers think that the price will increase, then the traders also tend to increase the price. The tax-free life expectancy has been kept unchanged during the period of continued high inflation. Emphasis is placed on indirect taxes. He compared it to a tiger hunting a weak deer.
He said that hundreds of crores of rupees of the former IGP have been deposited in the bank. It was lifted again overnight. Banks are supposed to report such suspicious transactions to BFIU. Where the money came from and where it was deposited, why not looking at his footprints?
According to Wahiduddin Mahmud, there is a weakness in overall economic management. The question is, what kind of commitment is there from the highest level of the government? Despite major economic weaknesses, effective reforms have been neglected. Borrowing has been continuously taken from domestic and foreign sources. The amount borrowed to cover this deficit is half of the accumulated interest on previous loans. As a result, there are signs that the budget may fall into a debt trap.
He also said that many fundamental weaknesses have come to the fore due to wrong policies for a long time. A culture of money laundering, defaulted loans, rampant corruption, irregularities, wastage and unaccountability has developed. Chaos in the banking sector, continuous decline in reserves, stagnation in export and remittance flows, decline in revenue and generation of black money. The state of the economy is like a sacrificial animal tied hands and feet and budgeting has to be done in such a situation. It is not possible to overcome these problems without fundamental policy changes. To meet the budget deficit, loans have been taken one after another at high interest rates from the country and abroad. If the economy continues to depend on debt, it will become impossible to implement the budget, even if it is not bankrupt.
The former governor of Bangladesh Bank. Salehuddin Ahmed said, ‘default loan model has now become a business model for the country. You take a loan from the bank, and never pay it back. This model is working. According to him, there is nothing new even if the budget is given in challenging times. The figures of the previous budget have only been adjusted here and there. No solid steps are seen in the policy and philosophy of the budget.
He said, it is called a contractionary budget. But the budget deficit does not seem contractionary. Reliance on bank loans has been increased to meet the deficit. If the government borrows more, how can the private sector borrow? And if the private sector does not receive loans, how will employment be? Small and medium industry sector will be the most affected in this situation.
The former governor also said that the budget should be based on performance. If necessary, some organizations should be closed, some organizations should reduce their manpower. There is no use in just throwing around the budget figures. Getting through tough times requires taking some tough steps. It should be transparent like sunlight. He said, to control the level of inflation, it will not be necessary to follow the IMF formula by increasing the interest rate, dollar rate and contractionary monetary policy. Market supervision should be increased. At the same time supply should be increased.
Advisor to the former caretaker government and executive chairman of the private research institute PPRC Hossain Zillur Rahman said that the finance minister has reflected the hopes of the three parties in the budget. The IMF, the bloated groups and bureaucracy that have been courted by the government have been appeased. However, hardworking entrepreneurs and economic workers as well as common people have not been heard. Although there are some good words in the budget paper.
Hossain Zillur said that the political leadership did not accept the economic crisis until last year. Now talking about some problems after the shock. While most countries have controlled inflation by raising interest rates, we have imposed a nine-six limit. Investment did not increase through this. According to him, corruption has now become institutionalized. There has been a general decline in morals. If morality is not brought back, the crisis will deepen.
This prominent economist said, along with the poor, now the lower and middle classes are also in the crisis of inflation. According to the budget, inflation will be brought down to 6.5 percent. Where is the strategy required for this? There is no initiative in the budget for the youth who are in crisis of employment. During this period of high inflation, the tax-free life expectancy for the common man was not increased. New taxes on mobile calls and motorcycles have been hiked. A tax rate of 30 percent has been proposed at the highest level for charitable taxpayers. But owners of black money can make it white with 15 percent, which will discourage honest taxpayers.
Executive director of research organization Policy Research Institute Ahsan H Mansoor said that the country is on the verge of bankruptcy only because of the failure to collect revenue. The banking sector has been destroyed. Why this situation has happened, his white paper should be published. Governments must have political commitment at the highest level for fiscal and financial sector reforms.
He said that in this year’s budget, it has been said to take a loan of Tk 1 lakh 37 thousand crores from the bank. But if the deposits increase by Tk 1 lakh 80 thousand crores annually, then how will the private sector take loans. He said that a major part of the revenue income is the administrative expenditure, which should be reduced. There is no need for so many ministries in the country? Power sector entrepreneurs have been given many benefits in the name of capacity charge. The government can now sit with them and make some amendments.
Regarding inflation, he said, reducing inflation is not a matter of budget. Interest rates have been market oriented in recent months to reduce inflation through contractionary monetary policy. Of late, the exchange rate has moved towards market orientation. The Budget has announced a supportive stance for monetary policy, which is positive. Inflation is likely to come down in the next 6 to 9 months if interest rates are not pegged again and the taka-dollar exchange rate remains stable.
CPD executive director Fahmida Khatun said, inflation has reached this level due to policy mistakes and weakness. Even if other countries raise the interest rate, it is kept at nine-sixth in Bangladesh. When the economy was in good shape, reforms were not made. According to him, this year’s budget has increased indirect taxes rather than increasing the scope of taxes. This will increase the pressure on the poor as well as the low- and middle-income people. This year’s budget is the budget of opportunists. Various measures have been taken to facilitate the corrupt.
He said, due to corruption and mismanagement, the economy’s ability to create employment is decreasing. The banking sector has been left fragile. There is nothing left for the common man. Many people are now unable to withdraw money from the bank.
Former Finance Secretary and former Comptroller and Auditor General (CAG) Mohammad Muslim Chowdhury said most of the revenue is indirect taxes, which apply equally to the rich and the poor. As a result, the poor are under pressure. Instead of doing these direct taxes should be increased. Tk 1 lakh 82 thousand crores of defaulted loans in the banking sector. However, if you add the foreclosure, re-listing, pending in court, the defaulted debt is over five lakh crore rupees. You have to pay attention to this.
A. K. Azad MP said, 30 percent tax should be paid by earning honestly. And owners of black market and illegal money will pay 15 percent. It can’t be. He is a Member of Parliament and the people did not give him a mandate to support such a Tughlaki act. He will personally bring to parliament to cancel this opportunity.
A. K. Azad said, if the income is more than Tk 38 lakh, then 25 percent tax had to be paid. This time 30 percent must be paid. And those who bought a house in Canada-Malaysia without using bank loan money in business and now bring it back, they will have to pay 15 percent tax. No way it can be. He said that the farmer pays the rent properly. However, the law-and-order forces collected the money through barricades while taking the produce to the market. At the time of sale in the market, rent has to be paid again. Farmers are not excused. He who does not repay thousands of crores of bank loans is forgiven.
He said that the government’s operational expenditure is more than the development expenditure. So how will employment in the country? The budget has set a high revenue target. There is a shortfall of Tk 80 thousand crore rupees from the current fiscal year revenue target. The NBR chairman has occasionally said in public that the target cannot be achieved without political will and with the existing manpower.

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