Public attention is essentially diverted to the observance of International Mother Language Day, Ekushe February for us in Bangladesh during the month of February. It's when the debate returns about implementing Bangla in all spheres of life. Much is said and the exhortations are many. Unfortunately with the end of the month all of that goes up in smoke and the focus is towards March, the famous declaration by Bangabandhu at Suhrawardy Uddyan, the infamous crackdown on March 25 and the Declaration of Independence on March 26.
While the panorama shifts, the government quietly begins its preparations that will lead to the June budget for the next fiscal year. Side by side will begin consultations with chambers and businesses that this year promises to be grim. Failure of the National Board of Revenue (NRB) to collect targeted revenue and having all but exhausted the target of borrowing from banks the government will be asking businesses how to increase revenue earnings. Businesses on their part will point out the failure of the new VAT law to rake in more money and the delay in forcing banks to introduce the single-digit interest rates on loans as well as allowing errant businesses that have defaulted on loans being handed an olive branch.
With inflation at 5.8 per cent, the highest in the region, the citizen has been overburdened by the unusually high cost of essentials. Middle class and retired persons that depended on returns from government bonds have been dealt a double whammy. Interest rates have been reduced on these and taxation on whatever the return has been doubled. Deposit rates of banks have been reduced to 6.0 per cent and non- banking financial institutions (NBFIs) have for the majority gone bust leaving the depositors unsure of getting back their investments leave alone the interest. In essence all corridors for a decent return on investment have been blocked. This leaves depositors in a position where they stand to lose money on investments thereby also closing the door on wealth generation. It comes as no surprise that fast moving consumer goods companies are reporting reduced off-take in sales. This too will have an impact on revenue for the government.
It's serious when revenue, exports and local investments are down and banks are in liquidity crisis. The bank shortfall was partly met with the government increasing its fund holdings with them up to fifty per cent. Instead of emergency punitive and recovery action defaulters were allowed a generous window of rescheduling including at an almost laughable 2.0 per cent interest. While this made the books look more attractive, the money itself is far from being returned, most of it having been allegedly laundered abroad.
Local investments are unlikely to grow even with the drop in interest rates mainly due to delay by most banks to reduce the rates and the process and time loss in processing the loans. And banks, especially the multinational ones, have proved that businesses do take loans at higher rates and still make profits. The key factor here is that political influence doesn't interfere with their robust loan sanctioning process.
Exports of the garments industry have fallen due to either slow growth or even recession in importing countries. Harder bargaining for lowering sale prices is making it unviable for the industry. They, therefore, have been clamouring for devaluation of the Taka in line what those countries that have taken share from Bangladesh exports, have done. But as anyone knows, devaluation has its own demons in rising import costs especially that of raw materials. Added to this is the fallout of the coronavirus in China, the lead destination for our input materials. The Chinese Ambassador in a rare press meeting has urged Bangladesh not to look elsewhere for these imports and the message to the government was clear. Some good news was expected on the Rohingya issue. That carrot becomes somewhat stale when we are told that some of our ambitious mega projects might experience implementation delays.
It goes without saying that the almost Tk 1.26 trillion (1,26,000 crore) that has reportedly been siphoned out of the country has hurt the economy. The chances of alluring the hapless citizens to pour in that kind of money are slim. The desperate effort to bring some sanity to the stock market by putting up public sector banks on the list may well backfire if the causes of the crash aren't investigated and safeguards put in place.
All of these indicators point in one direction - new direct and indirect taxes. Unless inefficiencies in revenue collection are addressed and local investments given a fillip there's more bad than good news on the horizon.
