Ensuring the economic wellbeing of people

No matter how many good doctors one sees to recover from a disease, one will never recover if one does not take the medicine prescribed by the doctor properly and regularly. The economy of Bangladesh is like that. Some of the economic indicators have been volatile since the start of the Ukraine-Russia war. There is the high inflation while the value of money and the foreign exchange reserves are decreasing. Policy makers said the pressure on the economy was due to various events overseas.
But now the Bangladesh Bank is saying that the country's economy is facing headwinds, not only because of the Russia-Ukraine war but also because of six internal factors. The six factors are meteorological disturbances (extreme heat waves, heavy rains, unexpected floods), unethical business practices (syndicates, hoarding, price fixing, artificial shortages, etc.), poor corporate governance, wilful debt culture, fuel and electricity price hikes, and over and under-Invoicing (duty evasion by false declaration on import-export).
The central bank, however, has also mentioned three external factors, namely, the Russia-Ukraine war, the disruption to the international supply chain, the increase in transportation costs and prices of various consumer goods, including fuel oil. As a result, a deficit is created in the foreign exchange balance and the local currency is greatly depreciated.
According to the Bangladesh Bank, the country's economy is facing three major challenges, such as volatility in the exchange rate, high inflation and high defaults. This assessment of the Bangladesh Bank is one and a half years after the onset of the recent economic crisis. The Bangladesh Bank has taken steps to let go and has also stopped lending to the government by overprinting money. Also the central bank has now started taking advice from economists. Several rounds of consultation meetings have been held so far. There the reasons behind the crisis have been discussed.
Bangladesh Bank's former Chief Economist Mustafa K Mujeri said that the problems identified by Bangladesh Bank were old. Practical and effective measures should be taken to solve these problems. Therein lies the real problem. There is no effective initiative to solve the problem. Solving these problems will require unreservedly strong political will.
At the start of the Ukraine-Russia war in 2021, the price of the dollar in the country was around 87 rupees. The price of the dollar increased in the space of one and a half years and now it is selling at around Tk. 110. At this time, on the one hand, the price of goods in the international market increased, and on the other hand, due to the increase in the value of the dollar, the importer had to spend extra money to bring in the goods, which put a pressure on the reserves, and increased the inflation rate.
For more than a year, the common people have been suffering from high inflation. According to the Bangladesh Bureau of Statistics (BBS), the average inflation for the fiscal year 2022-23 was 9.02 per cent. In the first three months of the current fiscal year (July-September), the overall inflation was over 9.0 per cent. Apart from this, food expenditure was more than 12 per cent in August and September last. Lower and middle class people suffer due to the high food prices. This much food inflation rate has not been seen in many years. Controlling inflation is now the biggest challenge of the economy. Bangladesh Bank has a major responsibility to control it. The same Bangladesh Bank is now saying that the prices of products in the world market have decreased. But Bangladesh is not getting the benefits, because, there has been a major devaluation of money.
This means, even if the prices of products in the world market fell, it is not possible to buy them by spending money (buying dollars) like the last one-and-a-half years ago. As a result, inflation cannot be brought under control despite the reduction in prices in the international market.
Planning Minister MA Mannan said about this, "Inflation control is the major problem in the economy. Inflation has increased as usual. Inflation has already decreased. It will decrease further." According to him, there are winds of growth in the economy. Demand is increasing, but the supply is less. Therefore, the market pressure is increasing. For this, we are taking measures. For example, open market sale (OMS) by trucks has been increased. Initiatives have been taken to increase supply by importing products.
According to the Bangladesh Bank, the amount of default loans at the end of last June stood at Tk 1.56 trillion. Compared to the previous three months, default loans increased by about Tk. 250 billion (25,000 crore). And in seven years, default loans doubled.
A former director general of the Bangladesh Institute for Development Studies (BIDS) said everyone became a wilful defaulter. Because, everyone knows that there are benefits, many benefits are available, if one is a wilful defaulter. All borrowers want to become wilful defaulters. It has now become an epidemic.
Bangladesh Bank has claimed that it has taken 12 types of initiatives to reduce default loans. Among these are the provisions for taking action against wilful defaulters under the Bank Companies Act: reducing family influence on bank boards; empowering Bangladesh Bank to dissolve the board of any bank; Bangladesh Bank's control over the bank's subsidiary funds; identifying some banks that have excessive default loans. Apart from this, agreements have been signed to monitor the performance of four state-owned banks and eight private banks. Bangladesh Bank has been given the power to take quick decisions on various issues including loan disbursement and loan acceptance of weak banks, dividend determination.
Zahid Hossain, former chief economist of World Bank's Dhaka office, said that the crisis could not be overcome because of weak corporate governance. A culture of wilful cheating. Unethical business is a symptom of these economic problems. These are all old problems.
How can we get a healthy economy?
1. Some time ago, Sri Lanka was in economic poverty. There was a movement in that country. The government was toppled. In a very short period of time, the economy of that country changed. We have to follow the policy of Sri Lanka. What did Sri Lanka do? How has the economic situation changed? Not too many steps. With just a few steps, the country was able to come out of its economic misery.
2. We have solutions for six out of nine domestic and external causes. So, first our government has to take a policy decision, our economy will run at its own pace, not on political decisions. The government has to take the decision to follow the economic rules. Only then reform work will progress quickly.
3. Irrespective of the party's opinion, the reform of the financial sector should be done on the basis of good governance. All political interference must be stopped. Politicians should be completely removed from the opportunity to poke their nose in the economy. Rule of law and good governance should be ensured in the financial sector.
4. A major change should be made in the policies made for the financial sector. Banks and financial sector should be completely taken out of the family model and clan model. For this, political decisions are very important. If not, the condition of the bank will go from bad to worse. One person or group cannot own more than one bank.
5. Bribery, corruption, irregularities have become very easy everywhere in our society today and we need to come out of this situation quickly. Therefore, the banking sector cannot be developed by engaging honest people. In this field, honest, dedicated and qualified manpower should be made available. There is no substitute for honesty. No alternative to good governance has been discovered in the world even today.

Abul Quasem Haider is Founding Chairman of Eastern University, Islamic Finance and Investment Ltd., Australian International School and Abul Quasem Haider Mohilla College, Sandwip, Chattogram. He is a former Senate Member of the University of Dhaka.
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