The fiddling around with interest rates may have just annoyed the one person that banks and the regulator should have stayed clear of. The Prime Minister has warned that if interest rates for loans go into double digits, stern measures will be taken. The Bangladesh Bank Governor now has to think anew. His protestation about no liquidity crisis hasn't been borne out by the sudden deposit rate increase, clearly saying there is an interest for funds at higher rates. Nonetheless, it's worrying enough for the Federation of Bangladesh Chambers of Commerce & Industry (FBCCI) to seek a meeting over liquidity and interest rate concerns. Essentially, this means funds are required but will have to either come from fresh sources. Harangued depositors are now wary of investing in a system full of leaks and there's enough to suggest even remitters are suspicious.
Revenue earnings are likely to fall short of targets and though a little over 3.0 per cent has been shaved from the Annual Development Programme (ADP), indications are that further spend reductions are likely. From the deficit perspective it's good; from a development perspective it's not. It doesn't help the taxman when media reports suggest over 7.0 per cent of its reported revenue achievements didn't make it to the exchequer in the last fiscal promoting details to be sought for from the field. It's more than time for new thinking towards a people-friendly tax regime that puts emphasis on volume rather than quantity.
The concept of the more affluent providing the bulk of income tax and VAT is nothing new. It happens everywhere, unless it is the United States where a rich-friendly President is in power. But even he has pinned the strategy on leaving people with more money to invest. Bangladesh has never been friendly towards wealth accumulation, though the spin-off benefits are manifold. With inflation outstripping wages, the West is moving towards hard-nosed right-leaning nationalism. The figures are obfuscated in Bangladesh because inflation is calculated without taking into account additional spends on a variety of hidden or unstated costs.
There is also another side to the interest-rate saga. Roughly a year ago, there was surplus liquidity and no takers. Bad loans take time to become such so the only other conceivable factor has to be plugging huge holes with depositor funds. Indeed, certain banks have been asked to provide the prop-up funds. Some of the names doing the rounds for facilitating unheard-of loans to less than reputable businesses are shockingly familiar. While they absolve themselves of wrong-doing, no explanation has been preferred as to why certain banks that are or were under their control can't even pay back depositors including government or associate organisations.
The former National Board of Revenue (NBR) chief Najibur Rahman, who said he would be asking ministries about the quality of spend of revenues, is now Secretary to the Prime Minister. He is certainly better positioned than most to provide clear and succinct details.
