Prepare intended for shocks to drive economic growth

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Bangladesh should build on its astounding financial and development achievements rather than being complacent if it must conditions off any sudden shocks, said a noted economist yesterday.

"There are obviously many to be proud of throughout the country's near-half century journey," said Rehman Sobhan, chairman of the Centre for Coverage Dialogue (CPD), a think-tank.

Bangladesh clocked in 8.15 per cent GDP growth within the last fiscal year, the highest in the Asia Pacific region.

Now there is diversification in the agriculture sector, in rural areas and in the commercial sector, great results in the development of infrastructure & most substantially improvement in the conditions of the lives of individuals. 

Human advancement has been commendable, Sobhan said, adding that in lots of areas the united states has outperformed India and Pakistan. 

"There are a variety of indices we've got to be many to be pleased with. This is getting recognised globally and we have to also be happy about it. Now the united states should look ahead instead of being self-congratulatory and it is more productive to see what may be accomplished in the future, rather than, actually, rest on our laurels."  

Sobhan spoke at the inaugural ceremony styled "Bangladesh's economy: Envious Growth and Sustainable Development" at the Bangladesh Economic Meeting 2020 at the Pan Pacific Sonargaon hotel in Dhaka yesterday.

Banik Barta, a Bengali daily specialising on monetary and business information, and City Bank, an exclusive bank, organised the function in association with LankaBangla Finance, a non-bank economical instituition, on the celebration of the 100th birth centenary of the Father of the country Bangabandhu Sheikh Mujibur Rahman.    

Sobhan compared the coronavirus to the dark-colored swan.

He referenced to the publication 'The Dark Swan: The Affect of the Highly Improbable' compiled by author and former choices trader Nassim Nicholas Taleb.

The book focuses on the extreme impact of rare and unpredictable outlier events -- and the human tendency to find simplistic explanations for these events, retrospectively.

"This emerged away of nowhere and it is a good lesson to all or any of us that despite the fact that everything is going well throughout the market, random shocks will come and afflict you and you might not exactly be ready for this and you will have to develop appropriate reactions."

"Hopefully, it will be zero such thing and all the scientific skills of China and the rest of the world will enable us to escape out of this becoming a global pandemic. The primary message is: we must plan random shocks, which may affect our economy."

Regarding to Sobhan, you will find a have to get the country's fiscal and banking system in order. "Many has been created and far has been said relating to this. Much must be done now."

As the united states is on course to graduating to the big group, it needs to get a working economic climate, which dispenses resources in to the market in a competitive and predictable way and where the viability of the system, the borrowing and the recovery of the funds and the sustainable growth of the market are ensured.

"If you come across a system that's conspicuously malfunctioning and raises problems about the stability and credibility of the machine, this is not only going to impression the sustainability of the progress but also equally the capacity to attract significant amount of foreign investment." 

Speaking about Bangabandhu, Sobhan said the Independence leader's expereince of living was focused to the causes of the common people.

"He was an excellent believer in sociable justice and in the necessity to uplift the health of the employees."

Bangabandhu aspired to build prospects where in fact the most marginalised and deprived would have chances to improve their living standards, he said.

Whilst the country did well in achieving higher growth and reduced amount of poverty, there exists a long way to ensure equitable justice to live up to the vision of Bangabandhu.

"We happen to be on a way to considerable progress and success, but we've ground to go over and we've got nonetheless unfulfilled dreams to realise. I am hoping that the centenary 12 months and the 50th year of independence will create opportunities for setting us for the reason that direction," Sobhan added.

The financial savings instruments were introduced for the marginalised teams and pensioners but the program was distorted as the target groups did not receive the benefit, said Financing Minister AHM Mustafa Kamal.

This led the federal government to cut interest levels on postal savings certificates. 

The banking sector provides been automated, which will not allow savers to exceed the savings limit at the countrywide certificates.

"The interest on postal savings won't decrease. There is no chance for them to get cheated."

The minister also talked about the bearish currency markets.

"My responsibility about the stock market is distinct: I don't work for the ups and downs of the marketplace. My task is usually to accelerate the market. If the economy turns into stronger, the stock market will be stronger."

Kamal blamed the bigger interest rate for the high level of default loans.

The finance minister said he faced questions for his proceed to cap banks' financing rates at 9 %.

"But the market forces will take control when the situation becomes stable."

The minister also said the country's tax-to-GDP ratio will be more than 14 per cent -- and not the prevailing 9-10 per cent -- if all the tax holidays and tax exemptions directed at large infrastructure sectors are taken into account.

"But we are providing the taxes holiday and exemptions for accelerating industrialisation," he added.

All the complications facing Bangladesh are noted and the solutions is there, said Salehuddin Ahmed, a former governor of the Bangladesh Bank.

So, it is time to implement them.

"We have relocated out of the bracket of the 6-7 per cent growth rate. We are in a satisfactory level. Nonetheless it got us 47 years. We can't await another 47, or 27 or 17 years for the next phase of growth. We need to move fast. That's the primary challenge."

Many financial indicators are not at an excellent level. Remittance can be a lttle bit better. The negative expansion of exports has narrowed. The remaining indicators are facing issues.

Getting down the interest to 9 per cent will not bring expected benefits. The other costs connected with businesses have to be lowered and the unloading of products at the port needs to be fast-tracked, the ex - governor said. 

There are a lot of challenges facing the banking sector: the finance institutions are progressively getting weaker for lack of skill and corruption and honest and bold persons aren't being promoted.

In case of monetary and banking sectors there may be political guidelines, but it isn't good to dictate who will get loans at what rates.

Fixing the interest levels for savings and loans at 6 % and 9 per cent respectively does not seem to be practical.

There must have been a band from 6 to 9 % and 9 to 12 per cent, Ahmed added.

"Bangabandhu's call for financial emancipation continues to be relevant," explained Hossain Zillur Rahman, executive chairman of the Power and Participation Research Centre, a think-tank.

Bangladesh's GDP still depends on two sectors: garment and remittance. But the effectiveness of the drivers of the market would erode gradually.

So, the country should identify sectors that will drive the next thing of the overall economy and keep up the growth momentum, he said.

Bangladesh is facing a good syndrome of inefficient expenditure, said Rahman, also a good former caretaker federal government adviser.

The united states is spending a whole lot but there are inefficiency, corruption, waste and dilly-dallying in the expenditure.

The inefficient expenditure has already established a toll on the grade of growth.

Rahman needed increasing budgetary allocation for education and wellbeing sectors and improving the product quality in the offerings to move away from the low-cost labour market.

The spread between the financing rate and deposit rate hasn't been significantly less than 4.5 % in Bangladesh, so that it would be tough to limit it to 3 per cent, explained Mirza Azizul Islam, a former finance and organizing adviser to a caretaker government.

Deposit expansion is declining and if banking institutions can't mobilise deposits, they would not have the ability to lend. Individual sector credit growth had been at the cheapest level in ten years in December, he said.

If the banking sector can't channel money to the personal sector, job creation will be affected, which will finally hurt poverty alleviation work, Islam added. 

Bangladesh was one of the leading 20 reformers found in the most recent World Bank's record on the Simple CONDUCTING BUSINESS, said Salman F Rahman, adviser to the prime minister on private sector and investment.

"We wish Bangladesh will progress by another 25-30 places this year and you will be in the double-digit rating by next year."

To make the desired jump in the rank, that was 168th in 2019, laws are being amended, he said, adding that required amendments will be done by this year.

Digitalisation will be the next driver of Bangladesh's economy.

Bangladesh has laid out fibre optic cable found in almost all of the unions in the united states, laying the building blocks for digitalisation, Rahman said, adding that the united states also has the second major population of freelancers on the planet after India.

Banks' financing dropped off which will impact the economy, said Mashrur Arefin, managing director and ceo of City Bank.

"This is a matter of concern."

The banker needed raising the tax-to-GDP ratio. "People's income has gone up but many are not paying tax."

The government should pay attention to revive the stock market, whose key index shed 31 per cent in the last 2 yrs, he added. 

Dewan Hanif Mahmud, editor of the Banik Barta, moderated the opening ceremony.
Source: https://www.thedailystar.net

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