As Bangladesh is going through a period of significant transition, it is imperative that the new interim government addresses the pressing macroeconomic challenges that currently destabilise the economy. The exit of the Awami League regime has left many economic parameters, including unbearable inflation, in an unfavourable state.
Speaking to media, renowned economists called for giving the financial sector topmost priority to restore public confidence in banking and financial markets, including the capital market. Dr. Ahsan H. Mansur, Executive Director of the Policy Research Institute of Bangladesh, suggests the formation of at least five separate taskforces to address issues in the financial sector and revenue board. Specifically, he recommends two taskforces for the financial market-one for the banking industry and another for the non-banking sector, including the stock market. Additionally, three taskforces should be formed for the revenue board to focus on direct taxation, indirect taxation, and customs.
Dr. Mansur emphasises the need for expert assessment and recommendations, potentially including international experts, to accurately evaluate and improve the financial and public key organs. He remains optimistic that inflation could be reduced within the next four to five months, paving way for macroeconomic stability.
While the central bank has made some progress in improving the forex market, Dr. Mansur notes the need for a market-based crawling-peg system rather than a dictated one. Dr. Zahid Hussain, former lead economist of the World Bank's Dhaka Office, underscores the immediate challenge of bringing social stability and addressing the recent anti-discrimination student movement. The interim government must create a conducive environment for students to return to classrooms.
Dr. Hussain also stresses the importance of addressing inflation, forex market volatility, and weaknesses in the financial sector. He questions why the key reform measures under the PCA framework, scheduled for implementation in March 2025, cannot be initiated immediately. Reviewing budget expenditures to suspend unnecessary and politically motivated projects is crucial.
Dr. M Masrur Reaz, Chairman of the Policy Exchange of Bangladesh, calls for immediate actions to halt the system's bleeding due to mismanagement, misgovernance and manipulation of economic data. A thorough and honest analysis of the damages must be conducted, followed by two types of reforms: addressing governance failures and strengthening the macroeconomic situation.
In conclusion, the interim government has a monumental task ahead in stabilising the economy and restoring confidence.
Abida Sultana
A banker, Dhaka