Money is no problem but spending is

Most of the people who were born in the British period and consciously passed the Pakistan period are supposed to remember the accusation used to be made against the Eastern Wing (now Bangladesh) high officials that they willfully used to return the yearly development funds meant for Eastern Wing to the Pakistan's central administration with an unholy motive of being in the good book of the Pakistan administration. It was openly alleged that such officials used to do this with the ulterior motive of gaining high posts/promotions in the Pakistan central administration at the cost of deprivation of the Eastern Wing's common people. But what we see today in free Bangladesh when Pakistanis are no more here at the realm of affairs! Unscrupulous moneyed men laundering a huge volume of money abroad or/and spending the ill earned money on mere durable consumer goods like costly cars and posh residential houses, dodging the National Board of Revenue (NBR).      
Money is no problem but spending is in Bangladesh. Cumulative foreign development aid jammed the receiving pipeline because of utilisation incapacity while banks are burdened with a glut of excess liquidity with traditional captive clientele market clogged. With a broad hint at a bit of slowing down of economic activities in the free country such a worryingly paradoxical situation on the country's financial front is being portrayed in media reports these days.
When government's annual development budget utilisation now lags far behind the target and private investment hits the hard rock, the question arises wherein the money should be spent? In the absence of income growth of a vast multitude of commoners consumer spending is also limited in the widest sense, barring a fortunate and opportunist few. About such macroeconomic factors economists are loud in voices and prolific in writings, which is now substantiated by reports in major national dailies on the liquidity situation with the country's banking system, government exchequer and also aid pipelines. It has been admitted in different government high offices that there are limitations on the execution front in various sectors of the economy that contribute to the piling up of idle money in the country.
The amount of excess liquidity blocked in the country's banks' vaults, according to a lead story in a vernacular daily, comes to no less than BDT1.25 trillion. Foreign development financiers, on the other hand, have been on a long wait with mainly project-aid pledges worth some US$19 billion, equivalent to BDT1.482 trillion. The General Economics Division of the Planning Commission stressed attaining administrative capability of utilising the project assistance through effective dealing with the donors on conditions tagged to project undertaking and implementation, including purchases, for getting over the aid jam currently faced by the country.
A finance adviser of the former military-backed caretaker government said: "Lack of administrative capability is responsible to the extent of 75 to 80 per cent for non-utilisation of foreign aid". It is unfortunate that we are to hear such a comment after 44 years of the country's independence in 1971. In consequence, in a latest development, the government of the country has decided to cut down its bank borrowing in view of slow pace of Annual Development Programme (ADP) execution and in the wake of international market slump low need of funds for footing import bills. Oil is dirt cheap US$30 per barrel - costing a fourth of the previous oil price. As a result the banks are naturally barred from investing in government borrowing instruments to give vent to their idle funds.  
On the stock market side, portfolio investment in stocks is getting lost in an irreversible downturn. Because of a slump in domestic investment the borrowing by private companies is also in low gear. As such, alongside the longstanding idle money with non-performing loans (NPLs) that comes to a cumulative figure of around BDT570 billion the cache of idle money turns out to be an additional problem. Both the problems, by any economic analysis, relate to the macroeconomic factor - investment - such as investment in equity, portfolio, trade financing, debentures and government bonds. What went wrong where in the financial sector? As reported in newspapers, even the central bank authorities vented their worry about the situation the country's banks are increasingly getting in.
The country's housing sector is a big player on the investment front. A lot of industries like steel, rod, cement, brick, tiles, fittings and so on are allied or connected with this sector. But the fact is there persists a long-running recession in the real-estate sector also. Ironically enough this exists while an overwhelming majority of the city or town dwellers have no roof of their own over their head. Virtually it is a denial of one of the basic human rights of the citizens of the country.  A boom in the real-estate sector would have job creation facilities for millions on search of job in the country as well as spin-offs for great many related industries. The different other potential sectors of investment in this prospective country has to be unlocked - which, however, according to both political pundits and investors a stable, democratic political ambience is necessary sans hangover of uncertainties that haunts the country nowadays since January 05, 2014 controversial national election.  
The banks are turning - compelled by rude reality - to the realtors with pared-down rates of interest on home loans. Other sorts of durable personal consumers' loans, including car loans, are also being prioritised in the absence of industrial investment loans demand. Home-loan interest rates have by now already hit a new low, in some cases to the extent of 9.0 per cent. And for mere survival banks are now opting for aggressive banking drive. The interest rate with the banks was around 14 per cent on an average on loans applied for home or property. Particularly in the high-demand property sector, money-market sources say, adequate liquidity with banks and non-bank lenders generated an impulse for them to go for aggressive lending operations at rates as cheaper as possible.
The BRAC Bank was quoted as saying in a news report that they have adequate liquidity to lend and that they would go for aggressive banking. It said about a rat race ahead "We'll compete aggressively on the property market from now on". Some analysts say, in the present context, banks should devise diverse fields and modes of investing money amid the changes taking place in the country's banking arena. They may think about partnership investment down to the grassroots level in many productive ventures with potential entrepreneurs or investors. That may drag the bankers down from their cozy chairs and high-end cars to sub-districts as well as village level fields.      
This policy is befitting of an independent country's officials of all levels and sectors - both public and private - all should touch the grassroots. But unfortunately we are yet to blame ourselves for the inertia of the practices of the British and Pakistan days that has kept us captivated for the past more than four decades. Our politicians and high officials are habitually wrong in their work-attitude irrespective of the regimes they belong to and work under - pro-active and pro-progress changing of habits and behaviours conducive to patriotism is a must for their mundane, ethical and moral development for the sake of the country's economic enhancement and for their own spiritual salvation.            
The writer is a retired Professor of Economics, BCS General Education Cadre. Email: [email protected]