Wednesday | 15 January 2025 | Reg No- 06
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Wednesday | 15 January 2025 | Epaper

Six big economic challenges

Published : Tuesday, 4 April, 2017 at 12:00 AM  Count : 396
Haradhan Ganguly
The economy is now facing six challenges. Finance Minister Abul Maal Abdul Muhith informed parliament of this while he was giving the progress report of ADP implementation in the first quarter (July-Sept) of 2016-17. Six challenges include (a) declining remittance inflow (b) high rates of savings instruments (c) slow and improper implementation of ADP (d) paucity of trained manpower at middle stage industrial management (e) getting back equilibrium and good governance in financial sectors and (f) relevant administrative reforms aiming at infrastructure development and bringing good governance.
Many economists and think-tank institutions have been talking about these economic challenges for quite some time and finance minister's assessment in line with them has made the challenges more pertinent and emphasized. At this we are now bold enough to face the challenges and go ahead. Keeping macroeconomic stability is a praiseworthy effort of the government. Sometimes in medium and long run certain macro variables might face challenges due to some internal and external causes. It reminds that some hurdles are lying before. So we have to overcome those.
Remittance income plays a critically important role in the socio-economic development of Bangladesh both at the national and household levels. It contributes to poverty alleviation, supports human development, and increases savings and investment. At the macro level, it provides a cushion to achieve favourable balance of payments and stable foreign exchange reserve. Over the years, remittances have increased steadily with the growing number of migrants. However, in the recent past remittances inflow to Bangladesh has declined significantly. Say for example, first, annual remittance flow has been hovering around USD 14-15 billion since FY 2013. Remittance income slowed down during the last 18 months and recorded a (-) 2.5 percent annual growth in FY 2016. Second, in the early months of FY 2017, remittance inflow continues to face an alarming dip and falls below $ 1 billion a month for the latest two consecutive months (November and December, 2016). Similar situation was experienced in November 2011 when remittance went below $ 1 billion a month. Third remittance inflow during July-December of FY 2017 was the lowest when compared with the same period of the last four fiscal years. Fourth, Gulf cooperation council (GCC) countries are the sources of 57.6 percent of total remittance inflow to Bangladesh according to a study of CPD. During the July-December FY 2017 period, remittances growth was negative in all the GCC countries, (-) 16.9 percent, except for in Qatar which registered a positive growth of 45.6 percent. This perhaps could be due to ongoing constructive works for the Qatar FIFA World cup in 2022. Fifth, in addition to GCC countries, remittances from Malaysia, Singapore, UK and USA have also seen a significant fall during the same period. Sixth, cross- country comparison between remittance- receiving countries show Bangladesh, India and Pakistan were all in negative terrain in remittance inflow during this time. Cost of sending remittances to Bangladesh has increased during the fourth quarter of 2016 compared to the same period of 2015 according to World Bank's Remittance Prices Worldwide database. Observation shows even remittance transfer cost to Bangladesh has increased in case of Saudi Arabia. Once it was learnt, Bangladesh Bank is going to form an inquiry committee to look into the matter of rising remittance transfer cost. Even it will send delegates to remittance earning countries. But God knows the latest development.
Banking sector at this moment is dealing with a number if depressing trends. Declining trend in interest rates could not induce private sector investment going up. The main problem of this sector is lacking in governance. Excess liquidity in the banking system is also at a high level. At the same time, on-performing loan (NPL) has continued to rise.NPL in the banking sector has been following a certain trend during the last few years. It is observed that towards the last quarter (in December) of each year NPL comes down but starts to rise afterwards. Even though NPL was kept low by rescheduling 4.5 percent and restructuring 2.8 percent of total outstanding loans in 2015, the amount of NPL started to increase in 2016. It is encouraging to note that Bangladesh Bank has taken initiative to provide incentives to good borrowers and help them by providing 10 percent rebate on their interest payments against their bank loans. It is yet to be seen how many banks offer this to its borrowers. The major contributor to the rise in bad loans is the state-owned banks. Our finance minister also recognizes it. But the process of turning loan into bad one and its deep rooted culture could not be stopped. Here needs strong political will to bring about an accepted norm that is not functioning now.
Financing structure of the budget deficit was significantly dominated by non-bank borrowing. Government's borrowing from programmed sources such as sales of National Savings bond (NSD) certificates has increased notably and surpassed the target and it is continuing to rise. Finance minister is at times talking about doing adjustment of interest rates of savings certificates. Here also needs pragmatic approaches considering the reality attached herewith. As regards slow implementation of ADP, the ministries with the job of implementing ADP directly are to be held responsible for it. IMED is also accountable for its improper monitoring structure. Money released for ADP implementation is often lacking time responsiveness. Untimely money sanctioning and unusual delay due to red -tape is contributing to major cause of delay. At times we hear the talks of administrative reforms programme. But feedback of it is not discerning in bureaucratic functioning. Finance ministry itself concedes to the study that from 2010-11 to 2015-16 in this six years, budget implementation rates have declined 20 percent. Every financial year sees the ever growing budgetary allocations and the forthcoming budget will be of no difference. But every budgetary proposal or short, medium and long term planning have a predisposed postulate of their lion share of implementation. The more implementation the more is their success story.
Finance minister is worried about the dearth of trained manpower in the midlevel of industrial management. His concern reflects the incomplete scenario of our human resource development process. We need a balance between export of man power and demand for manpower for internal markets. Our infrastructure development has been sufficiently enough for being get rid of opposite views. National efforts in this regard are praiseworthy. After completion of Padma Bridge and other mega projects, these will boast of being a part of contributing to GDP growth enhancement directly. Though finance minister identified infrastructure as one of the challenges of the economy. Herewith he attached the question of governance. For project implementation, if government purchasing and bidding culture and system are to be made neutral, unbiased and digitalized, finance minister's worry would be minimized and for it reform agendas are to be expedited. We are convinced about government's efforts of keeping macro stability undisturbed. But sometimes in the unending way of going on, certain macro and micro variables might face challenges due to internal and external causes. It reminds us trajectories are lying ahead. So we have to brave those.r
Haradhan Ganguly is a freelance contributor and Secretary, United Nations Association of Bangladesh (UNAB). Email: gharadhan@gmail.com






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