Price For Uncheck Spending

Amid growing concerns,NPL keeps rising. Goods pile up due to ongoing fighting. Lack of credit and weak consumer activity Hit hard a firm's profitability.

Costs of high deficits are shockingly visible. Chaos in financial institutions provoked by Non Performing Loans(NPL) could be one of those. For a long time,I have not seen commercial banks’ ad in media on consumer loans. The obvious reason is that govt borrows money heavily from these banks,leaving little for private investors to finance their projects.

These big loans,distributed often by political or evil motives and not by project's rate of return or other technical parameters, were supposed to yield good return.However, they ended up in wrong hands and yet to go back to the banks' coffers. Their failed performance earned them the name NPL.

Last week,a news report says one of the conditions set forth by IMF is that NPL,which is 28.66% of total credit, should be lowered to 10% within the next two years(Source:“Khelapi Rin Komatey Hobey DUI Bochhorey(NPL Should Be Lowered In Two Years)”,Fakhrul Islam,Daily Prothom Alo,P-1,November 22,2022).This is an uphill task and in an election year a difficult task to comply. In fact,NPL keeps rising. Nevertheless, govt is optimistic about improving the situation by June next year.So everyone is wondering how govt could lower NPL to that desired level.

Meanwhile, interest rate rise,war in Ukraine have raised uncertainty and deteriorated financial positions of many firms. In Chattogram,exporters reported delay in shipments,increase in stocklot and low workorder.Some exporters have been stocking their items for more than 3 months(Source:"Gudamey Jomchhey Ponno,Dushchintao Barchhey(Stocklot Increases In Warehouse, Worry Grows)”,Masud Milad and Shuvonkar Karmakar,Daily Prothom Alo,P-9,November 25,2022). This delay in shipments and cancellation of orders have the risk of putting them into precarious position.

Though lending rate is hovering around 9% officially,central bank last week nodded to a rate of 12% for new lending,which is a bit high amid low consumer activity.There are reports that more and more consumers bank on savings to cope with the rising cost of living.

Despite official projection of a lowering inflation,price levels at the consumer level have yet to reflect it. News of arrival of wheat ships from Turkey or rice cargo from Myanmar and Vietnam have yet to lower the prices of wheat.Rising oil price and ongoing war on Ukraine used as pretext to raise the price of wheat in short span of time.When oil price has come down to $80/barrel and grain ships keep coming,prices of essentials are not coming down at the same pace.

Slash in consumption and inadequate credit,which is hard to access,for private sectors hint that rejuvenation of economic activity will not be easier. In this context,it is not clear how the government intends to curb on NPL. It is evident that ordinary people and honest investors pay the price for unregulated spendings in the past few years.