Where Is The Change?

No bold economic reform is on the horizon, Post election future may be the reason.

In less than 3 weeks, the interim govt is going to complete 6 months in the office. Though the whole home ministry is in complete disarray,as reflected in growing number of crimes, the govt did its best to restore law & order. All the reform commissions have submitted their reports. But it is the economy that needs more urgent care and reforms than anything else. I strongly believe this govt was brought to power to fix the economy, which is battered by systematic corruption of the civil-military bureaucracy and blessed cronies. The political reform is just a smokescreen.

Yet that much needed economic reform is no where on the horizon. The govt has enough people to carry out bold and radical economic reforms ,but the govt has not treaded on that path yet. Two incidents laid it bare. Governor of the central bank is a powerful position and a very competent man is in charge. Like the previous regime, we witnessed governor was invited to a meeting headed by a businessman who also happened to be chairman of a trouble ridden bank. Later, the central bank provided liquidity support of Tk 220 billion to 6 trouble-ridden banks. Few months later, governor was invited to a branch opening event of a specialized bank in Tangail. Later, we saw Bangladesh Bank provided Tk 125 billion to another 6 trouble ridden banks including the specialized bank in question. During the previous government, we saw how governor and judges went to event/ party organized by powerful client or accused before making crucial policy decision or verdict. This is happening again! Where is the qualitative change?

The IMF in its loan package made it clear that tax should be imposed on every income earning source. When this regime took power, it revived an old law,amended by the previous regime, that gives tax rebate on the earnings of microcredit institutions for five years. It could have been rationalized for two years , giving the govt vital revenue. In January this year, govt made another change into an ordinance regarding a leading microcredit institution. It is about lowering the number of govt appointed director in the NGO. It is indeed a laudable move. If govt reciprocates it in other public offices,then it will be a good move. In Pakistan reform package includes closure of 100000 posts in public offices. Similar thing here will at least save taxpayers' money.

Govt's economic management is also messy. In my earlier pieces, I repeatedly said that govt's decision to lift off duties on sugar and edible oil was an unwise move. The decision would cost the govt Tk 3156.5 crore in this time of austerity(Read "Review Decision On Tariff And Vandalism" published here on October 29,2024). Recently, govt decided to impose 15% VAT in all goods and services. This would raise prices of food at restaurant and internet packages, but would generate Tk 120 billion to state coffer. Had the duties been on sugar and edible oil and govt raised the corporate tax, more than Tk 120 billion might have been generated as revenue.

Crucial and bold reforms have not been done. A reformist govt could easily follow the contractionary monetary policy. Yet what it has done so far is just monetary and fiscal expansion. A political govt very rarely would embark on reform programs and this govt behaves like political govt . So our recovery may be prolonged as this govt is reluctant to initiate bold reforms like strengthening regulatory grip, fiscal restructuring and tightening and monetary tightening.

Reform policies taken so far indicate govt is keen to protect its own interest and wants to tread on a safer path. It does not want to antagonize major parties except the ousted one. At the same time, govt is concerned about the future of the institutions headed by key people in the govt after the election. This somehow explains govt's reluctance to start bold reforms.

So far we have not seen yet any attempt to reform the security establishment. In the last 15 years, we saw how corrupt groups and individuals in connivance with the Army ruined election and the economy. Just a week ago , few students staged sit-in before the Secretariat to demand Army involvement in construction of key facilities of a public university. This practice is a continuation of the past regime. We could at least see the news of corruption report if a private contractor is involved. Can we expect the same in case of an army contractor? Proper ordinance should be introduced to make accountable the defense establishment.

In brief, 6 months after the regime change, we have not seen yet any qualitative transformation. Interim govt is busy with their own interests and is not keen to start bold reforms, prolonging the economic crisis.

[Update: this piece has been updated on January 18,2024 atat 10:05 AM Bangladesh Standard Time. Updates include reference to sugar duty loss and some clarifications.]