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Economy in a shambles and budget risks debt-trap

Economists tell newspaper owner-editors' meet

FE REPORT | June 11, 2024 00:00:00

Bangladesh's overall economy is now in a veritable shambles and budget risks pushing the country in debt-trap, noted economists told a meet Monday and stressed comprehensive reforms as a remedy.

"Country's overall economy is now in a state of fragility and instability where budget is nothing but a sacrificial lamb," said Prof Wahiduddin Mahmud.

He finds logic behind terming the GDP-growth target at 6.75 per cent 'unrealistic' in the budget for the next fiscal year.

Overall economy is reeling from 'fundamental weaknesses' where any alternatives in budgetary system would not be pleasant, said the economics professor at the programme arranged jointly by Editors' Council and Newspaper Owners Association, Bangladesh (NOAB).

A galaxy of economists and policy analysts, apart from editors and newspaper owners, attended the discussion programme on 'State of Economy and Proposed budget 2024-25', held at a Dhaka hotel.

Carrying on his analysis of the prevailing economic and financial traits Dr Mahmud said banking, the most sensitive sector in the economy, remained "unsecured", creating trust deficit in the economic system.

He presents a list of downside risks facing the economy: bloated internal inflation, deficit in domestic revenue mobilisation, declining trend of import and export, siphoning of capital, and banking-sector disorder.

"Budget is like a sacrificial lamb in this situation where it has not much scope to move its hands and feet," he said in terms of a simile days before the religious fiesta.

The eminent economist has found interest payment of loans becoming an enormous burden for the government as half of the projected tax revenue for the next fiscal would go for debt service, with its consequence looming large.

"Budget may fall in debt-trap and the alarming situation in this respect is visible now," he alerts.

Also, Dr Mahmud finds economic policies treading a path that does not conform to the standards of morality-and cites one of topical instances.

He mentions the allegations that a former Inspector-General of Police has deposited and withdrawn huge sums of money from banking system which the banking-system rudder has failed to detect.

"As per Bangladesh Financial Intelligence Unit (BFIU), any transaction above Tk 1.0 million is supposed to be traced in its scanner, but it has not happened in this case," he says.

He predicts that new megaprojects taken at lower allocations in the budget in this situation would bump up the debt burden. Dr Ahsan H Mansur, Executive Director of Policy Research Institute (PRI), underscored the urgency of reform which needs political will to push through.

The noted economist, however, struck some positive notes on the healing of the current economic situation, like the taming of point-to-point inflation in next six to nine months.

He suggests cutting government's administrative expenditure that eats up 42 per cent of domestic revenue. Also suggested is a cut in tax benefit for power sector as subsidy and capacity payment became a huge burden.

"The biggest failure of the government is to generate domestic revenue sufficiently," he said.

Dr Fahmida Khatun, Executive Director of the Centre for Policy Dialogue (CPD), said "psychological disability" is there to take opinion from economists and experts as the government has an imagination on normal business environment.

She has found inconsistencies and only mathematical exercise in the budget without considering economic reality.

In banking sector, "reform is moving in opposite direction where decisions on bank mergers came without impact analysis".

Dr Salehuddin Ahmed, former Governor of Bangladesh Bank (BB), made a point that the country is repaying loan interest with loan.

Turning to non-performing loan (NPL) buildup, he said, "Business model has become loan-default model in Bangladesh now."

Dr Hossain Zillur Rahman, Executive Chairman at PPRC, said reform agenda is missing from the budget and government's economic growth-achieving strategies are not clear in it.

"Workforces among entrepreneurs' demand have not been addressed in the budget," he added.

Dr Rahman suggests addressing employment generation and re-evaluating economic growth strategies.

Mohammad Muslim Chowdhury, former Comptroller and Auditor General of Bangladesh, said the government should trim its operating expenditure as it is taking a major share in its budget.

He suggests initiating reform measures by forming commissions and using technology.

He notes that non-performing loan has bloated where a major portion of loan might have been issued as "paper-based only to siphon".

Such NPL has to be excluded as its defaulters could be brought under "money- siphoning or plundering-related legal action".

Publisher of Jugantor and Member of Parliament Salma Islam proposed waiver of duty-taxes on newspaper industry and taking measures to clear bill arrears on government advertisement.

AK Azad, president of the NOAB and Member of Parliament, delivering welcome speech, said the government must cut its unnecessary expenditures such as allocations for purchasing cars for UNOs and DCs rather than trimming tax benefits on some priority sectors like motorcycle.

On black money-whitening budgetary scheme, he said the proposed measure is "injustice to honest taxpayers who are paying up to 30 per cent while beneficiaries of the scheme would enjoy 15 per cent for not paying taxes on the money that might have been sent abroad for years".

"We don't want any megaproject with loan at this moment as its repayment has been imposing heavy burden on taxpayers," the lawmaker told his audience.

Editors' Council president Mahfuz Anam, Editor of the Daily Star, delivered vote of thanks. Dewan Hanif Mahmud, Editor of Bonik Barta, moderated discussions.

Editor of The Financial Express Shamsul Huq Zahid, Prothom Alo Matiur Rahman, Press Club General Secretary and Editor of Bhorer Kagoj Shyamal Datta and Editor of New Age Nurul Kabir attended the programme, among others.

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