Leading economist Dr Ahsan H Mansur says the International Monetary Fund conditions for lending $4.7 billion to Bangladesh were relatively lenient, but it will be no easy task for the government policymakers to meet all of them.
A former official of the international lender, he shared his views on this thorny subject during the premiere episode of bdnews24.com’s “Inside Out” as he joined the live show on Sunday to discuss the state of the Bangladesh economy.
The event was streamed live on bdnews24.com and Facebook.
The weekly programme will be broadcast live in English every Sunday afternoon.
“To be honest, IMF’s conditions for Bangladesh were very mild. We should make [sic] our best effort to fulfil them. However, it will not be so easy,” he said.
“For example, they [IMF] want our tax-GDP ratio to increase. Our current tax-GDP ratio is the lowest in the world. Below eight percent, which is unthinkable!
“What’s wrong with increasing it? Of course, you want to increase it. However, the government has to undertake the reforms to do it.”
Apart from the IMF loan, the extent of the ongoing economic crisis in Bangladesh, foreign currency reserves, currency exchange rate, money laundering issues, and the weakness of the banking system were discussed in great detail during the 30-minute discussion.
One of the reform conditions set by the IMF was to bring down the non-performing loan ratio from 9.5 percent to five percent.
In this regard, Dr Mansur said: “The objective is desirable, and the government should make the best and sincere effort to do it. The issue is whether the government is going to be sincere about it.
“The message I'm getting from media or other publications is 'well, yes, we don't have to do anything under the IMF programme’.
“That's not the message I want to hear. We know what Bangladesh’s problems are; we also know that we need to address them.
“So please tell us what you are going to do to address them. Just saying that we don't have any problem, we don't have to do anything under the IMF programme is the wrong message being given to the public and people like us who understand the situation.”
When asked why the government waited until the IMF began to push to reduce the rate of non-performing loans, Dr Mansur, also the chairman of BRAC Bank, said: “All IMF is telling the government is to reduce the non-performing loans in the banking system.
“We [economists in Bangladesh] have been telling the government the same. Every news media reports the same thing every other day or week. So it's not a discovery or anything; the issue is that nothing has been done.”
“Our banks are still being robbed. Money is still being taken out of the country from the banking system. People who are rich and capable, they are not paying back to the banks.
“The problems are not being addressed. There is no political will or commitment to address it. That's where the IMF is coming from.
“Furthermore, they're just telling the government that you'd have to do it, which is in the interest of our financial system and the country.”
LACK OF CONFIDENCE IN THE BANKS
The recent trend of depositors withdrawing in droves from the banking system was also on the “Inside Out” discussion agenda.
On the topic, Dr Mansur, who is also the executive director of the research organisation Policy Research Institute, said: “Depositors became genuinely concerned about the future of their banks when they heard that an intermediate student [HSC-level student] received a Tk 9.7 billion loan with any prior experience in business and with no collateral.
“Moreover, right after that, the disbursement of a substantial amount of loan under a fake identity was revealed. Of course, people will be shaken.
“However, it's not that this lack of confidence impacted all the banks. We [BRAC BANK] experienced a 30 percent growth in deposits.
“Why? Because people had confidence. So they put more money in one bank and dried out the others. It depends on the quality of governance.”
The senior economist also prescribed remedies for getting out of the tight spot.
“It’s the central bank and the government’s responsibility to enforce regulations and demand accountability from bankers. Our banking sector has lots of problems.
“To address these issues, the number of banks must go down and down and bigger, stronger banks must emerge from this process, forming a banking commission to look into the issue, work out a strategy to strengthen the financial sector as a whole and the banking sector in particular.”
It was pointed out to Dr Mansur that the government rolled out programmes under the social safety net to support people with low income but sidelined the people in the lower-middle class.
The economist said: “I think the best thing for the government is to work on ensuring macroeconomic stability, cut down the inflation, bring down the cost of living for everybody.
“Increasing wages right now will be counterproductive; it will increase inflation further. So you will be in a spiral.
“Middle-class people will suffer for six more months, but let's provide them with some relief by ensuring price stability so that inflation goes down permanently.”