The country will need a functional financial system once it graduates from the list of the least developed countries
Bangladesh has achieved commendable progress since the country's independence in 1971, but there are challenges that need to be fixed to sustain the growth, create employment and reduce inequality, senior economists said yesterday.
"We have exceeded Pakistan in many indicators and got much to be proud of in the course of our nearly half-century journey," Prof Rehman Sobhan told a programme commemorating the birth centenary of Bangabandhu Sheikh Mujibur Rahman at Pan Pacific Sonargaon Dhaka.
Bangla daily Bonik Barta and first generation lender City Bank jointly organised the event attended by Finance Minister AHM Mustafa Kamal as chief guest. Salman F Rahman, private sector industry and investment adviser to the prime minister, spoke as special guest.
Rehman Sobhan said impressive economic growth and diversification of agriculture and industrial activities have also helped Bangladesh outperform India in some indicators, such as women's education and healthcare.
When Bangladesh got independence, its poverty rate was 80 percent, which has come down to 20.50 percent now. The country has also surpassed Pakistan in exports, foreign currency reserve and many social indicators over its independent journey of 49 years.
Prof Rehman Sobhan said Bangladesh's most significant improvement was in the life of its people and this has been recognised globally, including in the report of the United Nation's human development index.
However, he said time has come to identify the problems that are creating obstacle to realise the full potential of the country. One such problem, he pointed out, is with the banking system.
"Banking system has to be in order," said Sobhan who was also a member of the first Planning Commission in Bangladesh and a close associate of Bangabandhu.
He also said Bangladesh will need a functional financial system once it graduates from the list of the least developed countries.
Predictable rules and regulations are also very important as it creates a credible system and gives confidence to entrepreneurs, he said.
The economist also asked the policymakers to focus on what can be done in future. Random shocks will come in and that can impact supply chain and exports, he said.
He said if Vietnam can earn $300 billion from exports, there is no reason why Bangladesh should not be able to do that with dynamic entrepreneurs.
Sobhan said Bangabandhu dedicated his life for the common people and social justice. He believed in equal ownership in assets.
Dr Salehuddin Ahmed, former governor of Bangladesh Bank, said disparity has been rising and it cannot be handled with a handful of social safety net programmes.
"You need macro and fiscal policies to deal with the issue," he said.
Salehuddin also criticised the central bank for issuing two to three circulars every day, which, according to him, is unnecessary.
Dr AB Mirza Azizul Islam, former finance adviser to a caretaker government, said capping of deposit rate at 6 percent will badly hurt depositors' interest as their income will be negative after calculating inflation and taxes.
He also talked on nonperforming loans, stagnant private sector investment within 23 percent of GDP, declining exports and rising bank borrowing by government, which are some of the challenges the economy is facing now.
Dr Hossain Zillur Rahman, another former adviser to a caretaker government, stressed the need for exploring new growth drivers to sustain the growth and take the country to a higher growth path.
The government's inefficient spending will also affect the quality of credit, he said.
Finance Minister AHM Mustafa Kamal said high interest rate has fuelled nonperforming loans in the country.
"Why will NPL not soar when the interest rate becomes 25-28 percent?" Kamal said, supporting the move to cap the lending rate at 9 percent.
He said some people are criticising the government decision of capping interest rate in market economy. "Every country does it. When there will be stability, demand and supply will fix it [rate]," Kamal said.
He said interest rate must go down for the sake of the country's industrialisation.
Salman F Rahman said the government is working hard to improve the conditions for doing business.
"We will improve 25 to 30 notches in this year's doing business ranking to be released in October," he said. He also briefed about the government's launching of one-stop service centre and automation for registration of new companies in 2 hours.
Also, the government is getting ready for the fourth industrial revolution by introducing a curriculum in primary school soon, he said.
Mashrur Arefin, managing director of City Bank, and Dewan Hanif Mahmud, editor of the Bonik Barta, also spoke on the occasion.