The government is going to hold the next national election with a weaker economic management and stability mainly because of jittery banking sector, the Centre for Policy Dialogue (CPD) said on Saturday.
The CPD suggested that the government show “political farsightedness” to go through a “conservative economic management” to somewhat offset the instability ahead of the polls.
“Even though 2017 started with a commitment, but the commitment did not continue till the yearend. Overall macroeconomic stability became somewhat weak and came under pressure last year,” CPD distinguished fellow Dr Debapriya Bhattacharya commented.
He made the comment while addressing a press conference on the state of economy.
“Now, the government is heading towards a national election with a weaker economic management and stability,” he said, adding: “We don’t think that it (govt) will be able to make a turnaround with radical reforms as it lacks the political capital for doing so.”
Private investment did not improve last year in line with the commitment, the role of direct tax in revenues remained low in the financial sector and the country’s balance of payment entered negative territory, Debapriya pointed out.
The suggestions for preventing measures or reforms were not paid heed to, rather the government stepped back— a glare example of which was the banking sector.
“2017 will be identified as the year of bank scams and there is no sign of improvement this year.It can be assumed through the banking sector’s situation what was the government mindset about reforms,” he further commented.
Rising trend of loan defaults, provision shortfall, dominance of a handful of people in loan defaults, recapitalising state banks with taxpayers’ money, change in some private banks’ ownership through administrative steps and capital flight through some private banks depict the gloomy picture of banking sector, he listed.
“The government did not take any steps to resolve these problems. Rather, it increased families’ control over banks through amending banking act,” he alleged.
Dr Debapriya held weakness in economic management responsible for the situation. He said lack of the finance ministry’s leadership role aggravated the situation.
According to him, the finance ministry lacked in terms of reform initiatives, coordinating different sectors and decision-making.
Cronyism in awarding banks’ ownership was also a major problem behind the present banking sector crisis.
The country saw a decent growth in the last decade, but the decent growth has a dark side that it could not create quality jobs and cut poverty at a much quicker rate and inequality rose.
The inequality not only increased in terms of income and consumption, but most alarmingly in terms of resources, mainly because of bank loan defaults and embezzling money from large government projects, Debapriya also said.
Now, time has come to think about the quality of growth as poverty cut did not take place at the expected level, he said, adding that income or resource inequality have negative impacts on the growth in the long run.
The conservative measures include raising private investment, retaining Taka’s value, keeping inflation under control, ensuring quality spending to lure private investment and managing current account balance and overall balance of payment.
“Doing all the things requires political farsightedness because the new government will start from where outgoing government ends,” Dr Debapriya said.
Another CPD distinguished fellow, Prof Mustafizur Rahman, said political government usually tends to take important measures and lose appetite for reforms prior to elections.
CPD research fellow Towfiqul Islam Khan presented the keynote paper at the conference which was also attended by its executive director Dr Fahmida Khatun and research director Dr Khondakar Golam Moazzem.