Things Remain The Same

Things remain the same 3 months later, Commit true reforms to make things better.

It has been more than 3 months since the interim govt assumed power with commitment to sweeping reforms. It is too early to comment how it made progress in that endeavor. White paper on economy is likely to see the light by Sunday next week. No major change is visible, this is the perception. One cadre-based party witnesses lifting of restrictions while the other one sees imposition of restrictions. Financial institutions free from one political creed while some specialized financial institutions see tightening of grip by other political creed. Financial institutions should be free from control of any kind of political creed. This should be the governing principle of financial institutions. At the same time, business and employment market should be free from all kinds of creed and garrison-based interference.

Consensus and reconciliation should take place among feuding parties. What we are seeing now is that consensus is being formed among like minded political parties. It will not dispel the uncertainty in politics and will not send a positive signal to the economy. Budget deficit may become wider in this backdrop and foreign loan may not be that easy next year. Moody's downgraded credit ratings of Bangladesh. Other credit rating agencies are likely to do so. Interim govt has not yet spelled out the date of next election. But elite civil society members stress for 4/5 years for implementing the reforms.

Current govt has a favorable ground to end discriminatory policies and to set up check and balance mechanism among state organs,particularly holding law enforcement agencies accountable to people. It is also in a favorable position to hold electoral reforms. Ordinances targeting free and fair election, accountability of law enforcement agencies and economy are enough for this moment. For these reforms, a govt does not need long time to stay in power. Most importantly , we have to initiate the culture of practicing democracy and accountability. This habit takes time to develop. A central bureaucratic machinery and a group of enlightened cannot install it and ensure it. But they can start the process.

Americans get rid of slavery through bloody disagreement. They outlawed slavery. They strengthened institutions to make sure they do not have to walk on the same path over some issues.

Govt ended controversial law that gave immunity to powerplant owners. It is planning to end draconian laws. Caretaker govt is being brought back to surface. But govt indulges in monetary and fiscal expansionary policies. While govt is lacking vital revenues, it lowered tariffs and VAT. Govt is providing liquidity worth Tk 225 billion to 5 trouble ridden banks. Earlier it had reintroduced a law that relieves microcredit agencies from tax obligations for 5 years. It is planning to issue bonds worth Tk 50 billion to pay energy dues¹. It is a continuation of practice started by previous regime that I highlighted in my "Economic Reforms: Morning Shows The Day" piece². It is mulling to introduce "Universal Basic Income", which aims to give every family a minimum income per month,costing the govt Tk 750 billion every year. Look what happened to Hasina regime,which gave 10 million family cards to families to provide subsidized food. It hardly reached the target group and her official residence got plundered, mob looted her fish, vegetables and swan. Moreover, there are kleptomaniac groups who are poised to siphon off this kind of social security programs.

It is a laudable move to give the exporters 8-year long extended credit to mitigate the loss from transitory effect of depreciation of Taka. But SMEs need more this kind of credit facility than exporters who benefit from Taka depreciation. I read a news report that divulged how a Gazipur-based SME sustained loss from rising interest rate,costing him around Tk 1.8 million. This SME needs more support from the govt to recuperate the loss.

Central bank said it would no more provide liquidity after this latest one. I think it will go for more policy rate hikes after the scheduled visits of IMF in the first week of December. Broader political consensus among feuding parties, alignment of monetary and fiscal policy, innovative program like the extended credit and a specific date on election could be the recipe for recovery. Otherwise, we will drive along the same roundabout.

References:

1. "Govt Owes Tk 500 Billion To Energy Sector,Govt Mulls Issuing Bond",Sheikh Abdullah & Abul Kashem,The Business Standard,November 05,2024. Link:https://www.tbsnews.net/bangla/%E0%A6%85%E0%A6%B0%E0%A7%8D%E0%A6%A5%E0%A6%A8%E0%A7%80%E0%A6%A4%E0%A6%BF/news-details-274296
2. "Economic Reforms: Morning Shows The Day",Rezaul Hoque,https://hoquestake.blogspot.com,January 12,2024. Link:https://hoquestake.blogspot.com/2024/01/economic-reforms-morning-shows-day.html?m=0