Access of people and businesses to funds squeezes as Bangladesh's "financial deepening" is on the decline with its domino effect on the economy, says economist Dr. Ahsan H Mansur.
In such a tight situation, people are not having wider choice of financial services, he says about fallout from the contraction in financial deepening, a major financial-sector indicator, which can be defined as increased provision of financial services to the people, with wider choice of services channelled to all levels of society.
This financial terminology generally implies more liquidity. This is based on the premise that the more liquid money is accessible in an economy, the more is the financial deepening and opportunities for
continuous growth and expansion.
"We're regressing in such one key indicator. We had the financial deepening at 64 in the past and it is now 54," Dr Ahsan H. Mansur, executive director of the Policy Research Institute of Bangladesh or PRI, told economic reporters Saturday about the finding.
The indicator, measured as a ratio of broad money and GDP, should have been in Bangladesh now at 84, if the progress continued.
Dr Mansur presented the views at an event organised by Economic Reporters' Forum (ERF) on the cause of distress in the banking sector in Bangladesh.
ERF general secretary Abul Kashem was moderator while its president Refayet Ullah Mridha presided.
Citing parables, he said the financial deepening is at 90 in India having an almost similar economy as Bangladesh.
And the indicator in East Asia is between 110 and 129 while over 200 in China.
On the much-talked-about EPB export-data mismatch, Dr Mansur said most information is being hidden in the financial sector. He opines that accurate information matters most.
"Bangladesh Bank is now showing 11-percent non-performing loans. In fact, defaults or bad loans are 25 per cent."
He hinted that there are many inflated data in the country's agriculture sector, saying that "we are producing much rice but we have to depend on rice imports."
And "We're second in producing fish, but we cannot eat fish. Who consume those?"
The economist deplores that the problems of banking sector are being kept alive without solving them. "That is, the smelly dirt of the house remained beneath the carpet. Does this actually remove the smell? No, it will stink again."
He opines it is not possible to solve the problem of this sector by "hiding bad loans, irregularities, corruption, money laundering in the banks".
Dr Mansur told the meet that for lack of sufficient dollars, the government is not able to pay the bills of various sectors, including the energy sector.
"If the health is not good, then one cannot carry his burden. Due to the weakness of the banking sector, now the banks are not able to give loans to the private sector," said Dr Mansur, who had once served the IMF.
He recalls that the government mentioned it would take up reform after the elections. After six months of the elections there is no initiative for reforms - needed in the financial sector, public expenditure, service delivery and tax mobilisation.
"Political economy reform is very much important."
The PRI ED said: "We need reform for our own sake. We're consuming the deposit. How long will the bank run like this?"
He stressed the need for publishing "a white paper" on the banking sector.
The government has to do that without bias, not through Bangladesh Bank. "We need to find out the reason for the current situation in the banking sector."
Now the growth of bank deposits is 8.0 and a half to 9.0 per cent. If it increases this year, it may be 10 per cent or Tk1.70 trillion.
"How will the banking sector give the loan from the banks for the new fiscal year?" He posed the question about the liquidity hardship.
If the government takes a loan of Tk 1.375 trillion, the private sector will not get money.
On stagnant private-sector growth, he said the growth of the private sector has been estimated at 27 per cent in the budget despite the fact that this hovered between 22 and 23 per cent for long.
"If the growth of bank deposits does not increase, how can the 27-percent growth be achieved?"
Dr. Mansur mentioned that financial -sector reform begun first in the early 90s was successful and the second reform conducted during 2001 also was successful.
"After the reforms all financial indicators were upwards but now all downwards," he said to underline the urgency of reform.
© 2024 - All Rights with The Financial Express
