Good governance, transparency key to revive economy: Economists

  • Without real accountability, transparency, and good governance, the economy will remain in dire straits, said Towfiqul Islam Khan, a senior research fellow at the Centre for Policy Dialogue (CPD)
  • The government has not taken any effective action regarding inflation, other than subsidising the deficit, said Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh
  • Tax evasion is occurring due to the weakness of governance, which is creating a burden on all of us, said Dr Nazneen Ahmed, the country economist at UNDP 

There is no alternative to ensuring good governance, transparency and accountability in the financial and banking sectors to offset the economic downturn and bring relief to the economy in the long run, said noted economists.

“The government needs to do an introspection for the prolonged economic crisis. There is liquidity stress and an overall lack of confidence in the banking sector. Some banks are even on the brink of collapse,” said Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh, at a roundtable organised by the Editors Guild, Bangladesh in Dhaka Gallery on Saturday.

“Without any reform, another Tk16,000 crore was given to them [the ailing banks] in the name of liquidity injection. So, what signal are we giving to the financial community and to the scammers?” he said.

“The government has not taken any effective action regarding inflation, other than subsidising the deficit in response to inflation or depreciation of the currency [taka] which escalated inflation further,” Ahsan H Mansur added.

Towfiqul Islam Khan, a senior research fellow at the Centre for Policy Dialogue (CPD), said, “In a word, our economy is now going through a financial crisis.”

“Without real accountability, transparency, and good governance, the economy will remain in dire straits. We need to seriously think about the expenditure of developmental projects,” Towhidul said, adding: “We have been talking about good governance in the banking sector for 12 years. I do not know whether it will happen or not.”

“There is a question of transparency and accountability in decision-making, policy-making and deal-making. If we cannot maintain good governance and accountability, then the banking sector, the power sector, and the government expenditure – none will survive. This is the GrandFather Clause,” he added.

Asserting that the private banks are now suffering from defaulted loans, which was a thing of public banks previously, Syed Mahbubur Rahman, managing director and CEO of Mutual Trust Bank Limited, said, “If we could have taken steps at the beginning, it [default loan] would have been stopped. But we did not take action. Meanwhile, others [defaulted borrowers] have assumed that they could get away by not paying debts.”

“Not only the board, but the management and the regulator are also responsible for [soaring default loans],” he said.

“For some reason, we have seen a lack of trust among depositors for the past few months and money outside banks is gradually increasing which is a big concern for the sector because the liquidity pressure is intensifying,” the banker added.

Highlighting some comforting aspects of the economy, Prof Dr Selim Raihan, executive director of the South Asian Network on Economic Modeling (Sanem), said, “We are not heading towards the kind of economic disaster that took place in Sri Lanka or Pakistan as we initially anticipated. There is inflation but the trend is downward. The price of commodities including edible oil in the international market is declining. If this is reflected in the domestic market as well, then it is a relief.”

“But the unemployment rate is the highest in history. The labour market and the social sector are under a lot of pressure in terms of people’s income,” he said, adding: “Though TCB’s open market sale [OMS] initiative is commendable, it is not enough.”

Pointing out that there is no comfort with regard to remittance, Dr Selim Raihan said, “We think that remittance will increase only if the dollar rate is made market-oriented. Hundi [an illegal money transfer channel] is not only sought by workers abroad, there is a big demand for hundi among people who are smuggling money out of the country. The Hundi business is booming because of this.”

Dr M Masrur Reaz, chairman of Policy Exchange of Bangladesh, said, “There was immense potential ahead of us. The hard-earned success and reputation we have built up over the past few decades, in today’s economic reality, is in question and almost on the verge of being lost.”

“The dollar rate has been adjusted several times since June, which was not necessary. It could have been done two or three times according to the inflation rate differential,” he said.

“The interest rate is 9-12% on consumer loans, which is 6-7% of the total portfolio. But the rate remains the same for business loans, which is above 90% of the portfolio,” he added.

Dr Nazneen Ahmed, the country economist at UNDP, said, “Tax evasion is occurring due to the weakness of governance, which is creating a burden on all of us. Traders now have to think about the taxes they have not paid for so long, due to which, the gas price has to be increased to reduce the subsidy burden. Businessmen should now pay taxes voluntarily.”

“Non-payment of taxes increases the burden on small and medium entrepreneurs,” she added.

Senior journalist Syed Ishtiaque Reza was the moderator of the event while lawmaker Hafiz Ahmed Mazumder, and Mostofa Azad Chowdhury Babu, senior vice-president of FBCCI, spoke, among others.

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