The economy has come under pressure due to the banking sector crisis, inflation and soaring imports amid inadequate export earnings and insufficient remittance inflows, the Centre for Policy Dialogue (CPD) said recently. The banking sector is suffering from cronyism, the think-tank said, adding that various irregularities and embezzlement of public funds are taking place with influential people involved in it, as per local daily reports.
The CPD said the stealing of public money by a handful of corrupt people and the rise in financial crimes in the country indicates that the banking sector is in dire straits. The CPD’s views come at a time when non-performing loans rose to Tk 80,307 crore between January and September last year, up from Tk 62,172 crore in December 2016, mainly due to irregularities in lending, political influence in loan sanctioning and weak corporate governance.
As a result, the financial health of some banks, namely Farmers Bank, NRB Commercial Bank and AB Bank, has recently deteriorated, creating a vulnerable situation in the entire banking sector, one of the main pillars of the economy. Some state-run banks, including Sonali and BASIC, were also hit hard by loan scams. The government provided a total of Tk 15,705 crore to bail out the state banks from taxpayers’ money between 2009 and 2017.
Currently, nine out of the 57 commercial banks in the country suffer from capital shortfall because of rising default loans, according to central bank data. The CPD organised the event to present its review on the economic development during the first half of the fiscal 2017-18. It said income and wealth inequality rose despite an average 6.5 percent annual economic growth between 2010 and 2016. According to its estimate, the revenue collection in the current fiscal may fall short of target between Tk 43,000 crore and Tk 55,000 crore.
There are many reasons for the current state of the economy. Financial scam bailouts are using hard earned taxpayer money inefficiently. Increasing taxes to pay for theft reduces the viability of business as they increase costs and reduce employment and growth generation. There must be a conservative approach to economic management by the government. Excessive and inefficiency in public spending must be curbed at all levels – it makes no sense to tax heavily and then spend the money wastefully – it is rather like the man killing the goose who laid the golden eggs.
There are many reasons for the current state of the economy. Financial scam bailouts are using hard earned taxpayer money inefficiently. Increasing taxes to pay for theft reduces the viability of business as they increase costs and reduce employment and growth generation. There must be a conservative approach to economic management by the government. Excessive and inefficiency in public spending must be curbed at all levels – it makes no sense to tax heavily and then spend the money wastefully – it is rather like the man killing the goose who laid the golden eggs.
Rather the money should be spent on welfare safety nets for the poor as it would increase domestic demand and increase growth – instead of paying for the sins of already rich financial defaulters. But the government has gone the other way and increased family control on private banks – thus further increasing the spots open for nepotism and more irregular loans. Reducing corrupt and tax evasion by the rich should be another way of earning more revenue. Thus a combination of both policies could be used to stimulate growth further. Taxing SMEs needlessly and putting further burdens like extra VAT will only decrease growth and investment. It is high time that the state got its macroeconomic act together.
