Economists fear foreign currency crisis [ Tritiyo Matra News ]

Economists fear foreign currency crisis

Local June 18, 2017

Economist and experts in a post-budget parley on Saturday apprehended a crisis of foreign currency in near future against the backdrop of sharp rise in non-concessional loans for implementing costly projects amid negative inflow of remittance and slow export growth.
At a daylong seminar organised by local think-tank Centre for Policy Dialogue, they also said that the 15 per cent Value Added Tax would put destabilising effects on people, especially the middle income group, because of price hike of essentials, transport costs and electricity.
They said that the proposed increase in excise duty on bank deposits would hurt people further and encourage the illegal capital flight which was rampant in the past several years.
Criticising the proposed allocation of Tk 2,000 crore as bailout fund for the state-owned commercial banks,

including scam-hit Sonali and BASIC, they said that the country’s economic growth in recent years had no gain because of huge unemployment.
Government representatives led by planning minister AFM Mustafa Kamal, however, dismissed the fear of foreign currency crisis in five years as raised by former adviser to caretaker government Akbar Ali Khan.
As the government planned to receive about $40 billion credit from Russia, China and India on high interest rate with short maturity period, the country’s debt sustainability would face huge risk, Akbar Ali said.
Terming proposed measures in budget as ‘inefficient’ and ‘non-participatory’ in absence of effective opposition in parliament, he also apprehended that the country was facing another ‘serious risk’ for depending too much on import for energy and power.
Mustafa Kamal, however, said that the country’s present debt to gross domestic product ratio of 30 per cent would not be threatened in near future against the backdrop of adequate foreign currency reserve equivalent to the country’s 10 months’ import.
He hoped that the government would be able to generate employment for one crore youths under the current seventh Five Year Plan to be completed in 2020 while most of the speakers expressed concern about the unemployment with economists Rehman Sobhan suggesting the framing of an employment policy.
Aided by state minister for finance and planning MA Mannan and ruling Awami League presidium member Abdur Razzak, Mustafa Kamal said that allocation of Tk 2,000 crore for recapitalisation of scam-hit state-owned banks BASIC and Sonali was not ‘unethical.’
He said that the state-owned banks should not be privatised as suggested by many during the discussion.
Those are still catering the need of providing government services to people, he said.
Echoing Mustafa Kamal, MA Mannan said that the United States and the United Kingdom recapitalised the banks after they faced bankruptcy.
Challenging the observation by Bangladesh Nationalist Party presidium Amir Khasru Mahmud Chowdhury that private investors were not confident now, Mannan said that private investment in the country grew.
Amir Khasru, also former commerce minister, said that the government was creating scopes for corruption taking mega projects, cost of which were much higher compared to the costs of similar projects in Europe and China.
He noted that mega infrastructure projects taken without proper feasibility study exposed the ‘dictatorship’ of the government as its acceptability at home and abroad is questionable following the unilateral election in 2014.
He criticised the government for not proposing necessary investment on human resource development in the proposed budget for reaping demographic dividend.
CPD distinguished fellow Debapriya Bhattachrya said that no measure was taken in the proposed budget to improve the budget implementation quality.
He said that the government was too much obsessed with quantity of budget and seemed oblivious about broader aspects of the budget such as employment, private investment and reform.
He said that the growths in recent years had no because of huge unemployment in the country.
CDP executive director Fahmida Khatun analysed the proposed budget and indentified about a dozen challenges in the areas of private investment, revenue target, implementation of fast track projects and proposed VAT rate.
She said that the proposed budget lacked reform in the financial sector which had been hamstrung by loan scams in the state-owned banks, and growing capital flight against the backdrop falling private investment.
She noted that inflation target of 5.5 per cent was doubtful and over Tk 4,000 crore block allocation in the proposed budget ahead of national election looked suspicious.
She also noted that allocation for health, education and agriculture was lowered compared to the GDP.
Keeping budgetary allocation for pension of the civil servants in the social safety net programme is almost rare in the world, she said, adding that this was done to show more spending on the social safety net.
Fahmida’s disclosure about rates of VAT in Pakistan, India and other middle-income countries were challenged by national board of revenue member Jahangir Hossain.
The taxman said median rate of VAT in India, Pakistan and Sri Lanka at 12 per cent as disclosed in the seminar was not correct.