World Bank, IMF and global economy
Friday, 31 October 2008
Mabubul Haque Chowdhury
THE United States of America, the European countries and the world is facing an unprecedented financial crisis. Big banks and financial institutions are collapsing one after another.
The World Bank (WB) and the International Monetary Fund (IMF) pressurise developing countries to go for economic and financial reforms. Both the institutions spend a lot of money to implement their suggestions. But what is the result? It is difficult to understand how the banking system in the developed countries is crumbling. The US government had to pump billions of dollars of tax payers' money to bail out the banks, insurance companies and financial institutions.
The market economy is not working. Why should the developing countries listen to the WB and IMF when the prescriptions of the developed countries are not working in their own countries? These two 'multilateral' institutions have done great harm to the world. The US has spent billions of dollar on an unwanted war in Iraq. It is spending a lot of money in Afghanistan. The former Soviet Union, failing to do what it wanted, had to quit Afghanistan. Recently, an American general sounded like that. The US is spending billions of dollars of tax payers' money for destructive purposes.
Do the US people endorse such unjust work? Do they approve such wastage of the tax payers' money? Who will fund the staggering bailout? The recession has slowed down everything in the US. Americans now earn less, and they can afford less. Many have lost their jobs.
The US, a traditional donor for the poor and developing countries, will not be able to help them in a big way. Due to less contribution from the US, the capacity of the WB and IMF to help the developing countries will shrink. The fall in employment and production could take long to solve.
How far the prescriptions of the World Bank and IMF consulting teams to switch over to private sector banking provide good results to Bangladesh and other developing countries is an open question.
Bangladesh needs to thoroughly check the credit portfolios to find out the strength of the assets against which the banks lent billions of taka to business groups or individuals. It needs to be checked whether the loans are vulnerable. Accordingly the system needs to be reformed to stop lending to doubtful borrowers who draw a rosy picture in their balance sheets only to borrow.
Faulty mortgages lead to lenders' losses as the loans are not covered by collaterals. All the public sector banks should right now re-evaluate their accounts to find out the ratio of good and bad loans. The govt. should make the needed law to facilitate disposal of loan recovery cases before things go out of control. Almost 40 per cent of lendings by public sector banks has turned out to be bad loans.
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The writer, a former general manager, Sonali Bank and Agrani Bank, is also a member of Bangladesh Economic Association and the Bangladesh Academy
THE United States of America, the European countries and the world is facing an unprecedented financial crisis. Big banks and financial institutions are collapsing one after another.
The World Bank (WB) and the International Monetary Fund (IMF) pressurise developing countries to go for economic and financial reforms. Both the institutions spend a lot of money to implement their suggestions. But what is the result? It is difficult to understand how the banking system in the developed countries is crumbling. The US government had to pump billions of dollars of tax payers' money to bail out the banks, insurance companies and financial institutions.
The market economy is not working. Why should the developing countries listen to the WB and IMF when the prescriptions of the developed countries are not working in their own countries? These two 'multilateral' institutions have done great harm to the world. The US has spent billions of dollar on an unwanted war in Iraq. It is spending a lot of money in Afghanistan. The former Soviet Union, failing to do what it wanted, had to quit Afghanistan. Recently, an American general sounded like that. The US is spending billions of dollars of tax payers' money for destructive purposes.
Do the US people endorse such unjust work? Do they approve such wastage of the tax payers' money? Who will fund the staggering bailout? The recession has slowed down everything in the US. Americans now earn less, and they can afford less. Many have lost their jobs.
The US, a traditional donor for the poor and developing countries, will not be able to help them in a big way. Due to less contribution from the US, the capacity of the WB and IMF to help the developing countries will shrink. The fall in employment and production could take long to solve.
How far the prescriptions of the World Bank and IMF consulting teams to switch over to private sector banking provide good results to Bangladesh and other developing countries is an open question.
Bangladesh needs to thoroughly check the credit portfolios to find out the strength of the assets against which the banks lent billions of taka to business groups or individuals. It needs to be checked whether the loans are vulnerable. Accordingly the system needs to be reformed to stop lending to doubtful borrowers who draw a rosy picture in their balance sheets only to borrow.
Faulty mortgages lead to lenders' losses as the loans are not covered by collaterals. All the public sector banks should right now re-evaluate their accounts to find out the ratio of good and bad loans. The govt. should make the needed law to facilitate disposal of loan recovery cases before things go out of control. Almost 40 per cent of lendings by public sector banks has turned out to be bad loans.
.................................................
The writer, a former general manager, Sonali Bank and Agrani Bank, is also a member of Bangladesh Economic Association and the Bangladesh Academy