Economists at a meet Saturday said the banking sector was heading for 'deep trouble' while the economy facing problems, leaving commoners in woes amid living-cost escalation.
The Centre for Policy Dialogue (CPD), which arranged the discussion, observed that a 4-member household in Dhaka needs Tk23,676 for purchasing 19 essential food items per month for price push and inflationary pressure.
Even in the case of skipping the protein from the daily dish, the household needs Tk9,557 per month for the intake of other regular foods, Dr Fahmida Khatun, Executive Director of the CPD, said in her presentation on Bangladesh's macroeconomic situation.
At the discussion on 'Managing the Economic Crisis: CPD's policy recommendation', economists and other discussants viewed that the banking sector is going forward into "deep trouble" for what they said lack of governance and accountability and for regulatory failure of the central bank.
They also said the economy is also facing troubles for lack of prudent policy, and a massive gap between the thinking of the policymakers and of the civil society.
As they listed the problems, the think-tank as well as noted economists suggested which way to tread to avert feared crises, including reforms and policy updates.
Presided over by CPD Chairman Professor Rehman Sobhan, the dialogue was participated, among others, by Planning Minister MA Mannan, Member of the Parliamentary Committee on Law, Justice and Parliamentary Affairs Barrister Shamim Haider Patwary, Policy Research Institute (PRI) Executive Director Dr Ahsan H Mansur, Former World Bank Lead Economist Dr Zahid Hussain, former Bangladesh Bank Governor Dr Salehuddin Ahmed, and Managing Director of Berger Paints Bangladesh Ms Rupali Huq Chowdhury.
Dr Fahmida Khatun said the inflationary pressure is so high in Bangladesh that a 4-member family needs to spend Tk9,557 per month for feeding compromised food (except protein) which is higher than the minimum monthly wage of many working-group people, like in garment, fishing, tea packaging, hotel and restaurants, cotton textile industries, automobile workshops, plastic, rice mills and leather and footwear sectors.
"There is a gap between the prices of essentials in the domestic market and that in the global market although it is decreasing in the world markets," she told the meet.
The CPD recommended increase in labour wages, withdrawal of the advance income tax, advance tax and regulatory duty on the imported essential items, and expanding the social protection for the vulnerable groups.
Dr Zahid Hossain thinks the local inflationary pressure is mainly domestic demand-driven rather than from the supply side.
"If the inflation is coupled with supply-side problem amid the global crisis, then the GDP growth shall not expand at higher rate. But in Bangladesh both the GDP and inflation are growing," the economist said about the paradox.
Actually, the domestic demand and mismanagement in the local market are playing key role in fueling the consumer-price index (CPI), Dr Hussain noted.
About the banking-sector 'turmoil', Ms Fahmida Khatun said the non-performing loans (NPLs) have increased threefold in the last one decade from Tk427.25 billion in Q4FY2012 to Tk1343.96 billion in Q1FY2023 due to the poor regulatory measures by the central bank.
"The poor governance and lack of reforms have made the banking sector fragile, resulting in a further risk to the economy," she said.
Dr Salehuddin Ahmed said the regulatory weakness is much higher in the central bank, resulting in capital plight, higher NPLs, volatile foreign-exchange rate, and money flow to big businessmen rather than SMEs.
"The BB in recent days announces monetary policy from the hotel. Actually the BB's policy decision is guided by others, which is unfortunate.
"Why the USD rate will be multiple? Why the loan defaulters are not being punished rather being benefited? How they are allowed to reschedule classified loan paying only 2.0-percent interest? Are you encouraging those people and the fresh borrowers to become defaulters?" the former BB governor questioned.
Dr Ahmed also asked if it was a better reform allowing four people from the family onto the board of the banks instead of two members previously.
Laying emphasis on massive reforms in the financial sector for its recovery, Dr Zahid Hussain wondered why the government would go for reforms only after the suggestions come from the IMF.
Barrister Shamim Haider Patwary MP said, "The central bank has now become extension of the Ministry of Finance. Governor nowadays takes coffee and dinner with the businessmen in the restaurant and hotel. The BB fails to apply its regulations properly."
He adds: "The bank has almost been looted by some so-called businessmen. The East India Company during the British regime even did not loot the amount of money which has been robbed from the banking sector now. The looters are purchasing home in the US and Canada.
"This is a failed system. This system shouldn't be allowed anymore. Reform is imperative or the banking sector will collapse."
He also criticized the finance minister's role (ineffectiveness) during the current crisis when the country is facing economic meltdown.
Professor Rehman Sobhan said, "The low- income people are depositing money in the banks. The banks are lending those deposits to rich people. The borrowers are not repaying those in time. It means the poor are subsidizing the rich. Is it a proper banking system?"
PRI's Dr Ahsan H Mansur said; "India has adjusted the monitory policy including the exchange rate time to time. But what has Bangladesh done? It has gone for changing the exchange- rate policy overnight. Will it function?"
Our economic crisis is more domestically created rather than the impact of the global phenomenon. Look at the tax-GDP ratio. It is decreasing rather than improving. Is it a good economic policy of the government?"
Dr Ahsand Mansur criticized the BB's recent fund creation for the failed banks rather than punishing those, saying: "it is now high time to punish the errant banks in a bid to correct the financial sector."
Sketching a gloomy picture of public investment, Dr Mansur said the announced budget deficit is already higher which could be boosted manifold further due to some demands for subsidies and other financial adjustments.
"How the government will manage the huge budget deficit at the end of the current fiscal? On the other hand, the government fails to improve any significant reform in the revenue collections," he questioned.
Rupali H Chowdhury of Berger Paints Bangladesh said the financial -and revenue- sector reforms are imperative to tackle the economic crisis.
"Only developing lands at the economic zones will not attract investors. You have to simplify investment policy, attract investors with better packages. Or the lands at 100 economic zones will be vacant," she said.
Economist Professor Abu Ahmed said the USD rate is unmanageable as the government regulations have failed to check capital plight, income inequality and proper monitory policy.
Planning Minister MA Mannan disagreed with some opinions of the economists, saying there are mismatches between the view of the people and of the civil society.
"I regularly go to my village. I talk with people. I observed that there are mismatch between the demand of the people and the demand of the economists. I think we have done better for the people for improving their livelihood."
"We have cut the hunger, ensure better infrastructure, supplied drinking water, health and education facilities to the people. But it is true that we need some fine tuning of our works. We are doing that," Mr Mannan said.
Mr Mannan said: "It is true that the researcher will go in-depth and identify the problems in an economy. We must welcome those researches."
