A sum of Tk 922.61 billion has been misappropriated from several banks over the last 15 years through irregularities and misusing powers and possibly laundered abroad, says a prominent think-tank.
The Centre for Policy Dialogue (CPD) also has branded Bangladesh's current economic model as "crony capitalism" or as a "two-economy concept" practiced by the Pakistan government before Bangladesh's independence in 1971.
"The banking sector is in the grip of crony capitalism. The crony capitalists have used banks as vehicles for reaching their goal of financial oligarchy," CPD Executive Director Dr Fahmida Khatun told reporters in Dhaka on Saturday.
"Although we have fought for returning to "one-economy concept" from the "two-economy" one, practiced by the then ruling Pakistan government before our independence, now the country has again almost fallen into such kind of practice due to the crony capitalism," said CPD's distinguished fellow Prof Mustafizur Rahman.
The think-tank thinks the economy is facing such crony capitalism as the state organs and institutions have been subdued and all the powers grabbed by some influential persons and groups.
Crony capitalism is an economic system characterized by close, mutually advantageous relationships between business leaders and government officials.
And "two-economy" concept is that the ruling West Pakistan government was extracting all resources from the then East Pakistan for pampering the West which deprived the then eastern region (currently Bangladesh) people severely, the CPD recapitulates.
The amount of Tk922.61 billion has been siphoned out of the banking system as is reflected in 24 major media reports on financial- sector scams, said the CPD ED, Dr Fahmida Khatun, said while presenting the keynote on "State of the Bangladesh Economy in FY2023-24".
According to their findings, this amount of money is nearly 12.1 per cent of Bangladesh's current national budget and 1.8 per cent of the GDP. This fund could "easily fulfil budget deficit".
"During last several years, the banking sector has encountered several irregularities perpetrated by numerous business conglomerates and individuals, resulting in misappropriation of a substantial sum of money from several banks," the CPD report says.
The policy researchers air despair that recovery of the misappropriated funds remains uncertain and that there is possibility of siphoning off abroad through illicit transfers.
"It is interesting that the big and influential borrowers have got undue privileges of provisioning while the small borrowers are facing legal consequences, including imprisonment," the CPD report says.
Dr Khatun presented statistics that show non-performing loans swelled to Tk1560.4 billion or over Tk 1.56 trillion in the 4th quarter of the last fiscal year (FY2023) from Tk 427.25 billion 11 years ago in FY2012 as not only the state-owned banks but also the private commercial banks are also "affected now by the fraudulence practices".
Without reducing the NPLs, the capital-adequacy ratio in the financial sector cannot be improved, she told the media.
Professor Mustafizur Rahman feels that the country is almost heading toward a two-economy concept as the country's income distribution is not taking place equally, which widened the poor-rich gap.
"Look on the BBS's HIES survey. In 2010 survey we have found that the top rich 5.0-percent of the population was holding 30 times higher wealth than the bottom 5.0-percent population of Bangladesh. However, the latest HIES survey 2022 has showed that the top 5.0-percent richest people grab wealth 80 times higher than that of the bottom 5.0-percent poor," he told the meet.
The CPD shows how the taxation methodology is contributing to aggravating the disparity. "The indirect tax is the largest in proportion to other taxes in Bangladesh which is mostly paid by the poor and other people equally. But direct tax is lower than the indirect one which means the richer are not paying adequate tax. But the state organs are not taking proper action in this regard. It is affecting the balanced wealth distribution among the poor people," the professor said.
About the financial sector, the CPD distinguished fellow, Mr Mustafizur, said the situation came to such a pass that "as if you are an influential and rich person, you can borrow from local banks easily and need not pay back".
"If you collect data from court, then you can see there are very few cases under the bankruptcy law in the country. However, you can see hundreds of cases at the Orthorin Adalat," he added.
Terming the future foreign-debt service concerning one, Dr Fahmida Khatun notes since Bangladesh is under pressure of foreign-exchange reserves and its non-concessional borrowing is growing, the debt servicing could be major hurdles in the days ahead.
Prof Mustafiz alerts the country may fall into "debt trap" if its revenue income is not increased.
"Currently, the entire revenue income is spent for revenue expenditure in the budget. The development works are being conducted fully borrowing from local and external sources. It means the country needs to borrow even for paying back the outstanding loans. So, you can fall into to debt trap anytime," he says.
CPD Research Director Dr Khandker Golam Moazzem said the country's economy is gradually heading towards fragile state as its banking sector is now "disabled", inflation is "running like a mad horse", the external sector is almost "disabled" and employment faced a "blind-like" situation.
He further said the country's economy and employment stalled while "human rights and politics have been degraded".
"The country's at least 12 institutions like the central bank, SEC, Competition Commission, BEZA, BEPZA, BIDA, and the Ministry of Commerce have been demolished. It is very tough to recover their status after the election," Dr Moazzem said.
When an election is held non-participatory, then a government doesn't feel pressure or the opposition is absent for pressuring the government, resulting in a big challenge to reform of the state's major 12 organs, he added.
About the reserve crisis, Dr Fahmida said it is impossible to stabilize the exchange rate unless it is going to be a market-based one.
Although the central bank has taken initiative to open up the foreign-exchange rate but it is too late, which the economy is facing amid several other challenges from many fronts, she added.
About the bites of inflation, she said this high price is mostly for a lack of governance in the supply system rather than being global impact.
About the balance of payments (BoP), the CPD report says the scenario has continued to experience serious difficulties during July-October FY2024 when the corresponding period of 2023 is taken as the comparator.
"While some improvements are discernible in the current account, this was driven primarily by the sharp decline (of 20.5 per cent) in import payments," it adds.
On the volatile export earnings, the CPD claimed that there are data gaps between the EPB, Bangladesh Bank, and the buyers' side like the USA and the EU.
"The anomalies in export-earning figures must be examined very closely. The Bangladesh Bank and the EPB, as also the NBR, should sit together to address this issue and reconcile the figures and come up with actual export earnings figures," the CPD recommends.
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