Budget should allocate funds for independent banking commission
Abu Sazzad: Macro-economy of the county is going through the most worsening condition during last ten years especially in the field of revenue mobilization, public expenditure, annual development programme, budget deficit and financing and so on… The need for strengthening institutional capacity through establishing good governance to be enhanced.
“The vested groups are playing crucial role in policy making, so, strong political commitment is needed to ensure the real growth of the economy”, said Dr Debapriya Bhattacharya, Distinguished Fellow of centre policy for dialogue (CPD) while addressing a press conference on ‘State of the Bangladesh Economy and the Budget Challenges’ at
CIRDAP auditorium in the city yesterday.
According to CPD report, the discrepancy between revenue mobilization target and actual attainment has been recurring phenomenon. The failure to collect income tax at the targeted level has generally has been major reason of revenue shortfall over the recent years.
Lower VAT collection has become a rising concern, said the report adding lower non-tax revenue mobilization than envisaged level further added to the problem.
CPD laid emphasis on full utilization of public expenditure. Full utilization of the planned expenditure appears to be implausible. Some 53.30 percent of original ADP was spent during July to April of FY 2019 which is indicating that the government will has to spend the remaining fund within three months which would not bring any fruitful result.
Data discrepancy with regard to ADP expenditure between two government divisions (Finance Ministry and IMED) has aggravated in recent times which will be key challenge for the government to consolidate these two figures in the upcoming fiscal year.
Budget deficit registered a growth of 662.90 percent during July to December of FY 2019 over the corresponding period of FY 2018.
Lower revenue collection growth (11.20 percent) and high expenditure growth (21.40 percent) is a problem for the government.
However, revenue mobilization growth is substantially lower than public expenditure in FY 2019.
Structural weakness in the area of revenue mobilization need to addressed, recommended CPD.
CPD expressed concern for high volume of non-performing loans (NPLs), unwarranted return of the liquidity crunch, falling deposits in banks, decline in private sector credit growth, and increase in government borrowing from national saving certificates.
However, CPD identified root causes of the problems in the banking sector includes poor corporate governance, weak internal control of banks and poor management of state -owned commercial banks. Absence of rule of law and weak legal framework (such as Money Loan Court Act 2003 and Bankruptcy Act 1997), collusion between the unholy trinity of bank officials, businessmen and political actors are also problem for banking sector. Political influence in loan disbursement and failure to undertake strong measures against loan defaulters are problems for banks.
However, SCBs have failed to maintain minimum capital adequacy requirements since 2013. High volume of NPL and increasing trend of call money market are problems for banks.
Domestic credit growth has fallen slightly from 14.07 percent in March 2018 to 13.70 percent in March 2019.
CPD recommended that the upcoming budget may allocate funds for the recapitalization of banks. Recapitalization of losing banks should be stopped. No new license for new private banks should be issued. Dependency on national saving certificates should be lessened in to reduce the debt burden of the government.
Banking company act should be amended to reduce both the number of family members in the board of directors and the tenure of each member.
Bankruptcy act has to amend. Single borrower exposure limit for commercial banks should not be repealed.
The budget should allocate funds for setting up an independent banking commission.
CPD also expressed concern for weak state of capital market. The upcoming national budget should announce how the government will address unfinished agenda of market reform.
Robust export earnings and remittance inflow have not been adequate to underwrite their demands on foreign exchange, earning from high imports, rising debt servicing liabilities and other demands.
Finally, CPD report said that the government must realize its commitment mentioned in election manifesto.
Talking to Daily Industry, Debapriya Bhattacharya underscored the need for increasing agriculture, education and social safety net programme. He urged the new finance minister to attain the leadership quality to manage the financial plan of the country. Commenting on country’s economy, he said, economy is in a border line.
Dr Khandoker Moazzem, research director and Towfiqul Islam Khan, senior research fellow were present on the occasion.