Time Digital Report:The present economic crisis is not just because of the Ukraine war but a build-up of legacy issues, economists said yesterday.
"There is a narrative that the economy would be normal if the Ukraine war would not happen. However, there are legacy issues that make it difficult to solve the current situation," said Debapriya Bhattacharya, distinguished fellow at the Centre for Policy Dialogue.
Bhattacharya's comments came at the concluding session of the annual conference of the Bangladesh Institute of Development Studies held at the capital's Lakeshore Hotel.
The legacy issues comprise the banking sector's poor health, energy shortage, low revenue collection and depleting reserves.
"Were the tax to GDP ratio higher, the government would have been in a comfortable situation. If the efficiency of public expenditure was better, we would have a better result with the limited resources."
He also gave examples of poor energy planning and project implementation.
"The policymakers are saying that the present economic turmoil will dissipate in three months, but a global recession is looming large in 2023. So, it would be one of the toughest years in the recent decades where three problems will be the cause of tension: food, fuel and finance."
Bhattacharya proposed a package for two to three years where some steps should be taken with the coordination of all stakeholders.
"No one thought that such an impact was coming after the Covid," said Salman F Rahman, private industry and investment adviser to the prime minister.
The rising energy prices -- in a manner not seen in recent decades -- had the worst impact on the economy. At the same time, the Federal Reserve raised the interest rate, which was also not expected.
"So, we observed pressure from two sides."
At present, there is a little surplus in the current account balance as imports fell. Despite that, the reserves are depleting due to legacy payments.
"Some people are saying that Bangladesh will be like Pakistan and Sri Lanka as debt servicing will rise from 2025 to 2027. But, our dollar income also will rise then. It is an absurd argument," Rahman added.
Many a crisis has been created for rumours, said Ahmad Kaikaus, principal secretary of the prime minister.
For instance, a rumour was spread that banks do not have enough funds. This prompted the general public to withdraw about Tk 50,000 crore from the banking system.
Later, when people saw that the banking sector is able to provide funds, they are depositing the money back, Kaikaus added.
Bangladesh is still a domestic demand-driven economy, so the cost of doing business needs to be brought down and the interest rate adjusted, said Mustafizur Rahman, a distinguished fellow of the CPD.
"Institutionalisation and good governance would be much more important now than before," he said while criticising the government's decisions to allow four directors from the same family on a bank's board instead of two previously as well as increase their tenures from six to nine years.
He also criticised the government's move to bring back black money from abroad.
"Who prescribed it? These are not logically, morally, politically and economically justifiable," he added.
Defaulted loans are a serious problem for the banking sector, so the banks should work on bringing the volume down, said Mashiur Rahman, economic affairs adviser to the prime minister.
Though the economy recovered well from the pandemic, the industries are still suffering from a gas shortage, said Md Jashim Uddin, president of the Federation of Bangladesh Chambers of Commerce and Industry, adding that the factories are willing to pay more for uninterrupted supply.
"The tax to GDP ratio would not rise until the energy scam, the banking sector scam and money laundering are solved," said MM Akash, chairman of the economic department of Dhaka University.
The government is putting double effort to implement foreign aid-dependent development programmes as there is a huge amount in the pipeline, said Sharifa Khan, secretary of the Economic Relations Division.
The food, health and energy sectors are being prioritised in the government's decision-making, said Mamun-Al Rashid, secretary of the planning division.
Zaidi Sattar, chairman of Policy Research Institute; Atiur Rahman, former governor of the Bangladesh Bank; Syed Mainul Ahsan, visiting fellow of BIDS; Tapan Kanti Ghosh, commerce secretary; and Anwar-Ul Alam Chowdhury, president of the Bangladesh Chamber of Industries, also spoke.