Although the opposition alliance has been accusing the government of ‘destroying’ Bangladesh’s economy, former Governor of the central bank Mohammad Farashuddin believes it is better placed than that of India, Sri Lanka and Pakistan.
Farashuddin lauded the incumbent government’s economic management but differed with Bangladesh Bank’s recent policies.
“We’d have been more successful if we could separate politics and economics,” he said in an interview with bdnews24.com, referring to the country’s current phase of political uncertainty.
He, however, said an over 6 percent GDP growth was a ‘big achievement’ despite problems.
Bangladesh’s main opposition alliance led by the BNP has been a staunch critic of the government’s economic management. They allege Bangladesh’s economy has been ruined by loot and corruption.
Several research organisations have also blamed government policies for failing to lure investment due to persisting political instability.
Farashuddin, however, expressed a different view. “Apart from one or two indices, the economy is doing well,” he said.
“Bangladesh’s economy will be considered to be doing very well if compared with any other country in the world.
“I believe, the government was on the right track in managing economic issues efficiently over the past four and a half years,” he said.
The former government official said the country’s large workforce had contributed the most to this huge progress.
“China is lagging behind as it does not have manpower,” Farashuddin said, blaming it on their ‘suicidal’ one child policy.
“We are going ahead utilising our manpower for which, I believe, the Americans are being able to buy products at a cheap rate. They can now buy three trousers with the money earlier needed to buy a single one.
“It has been possible for the Bangladeshi workforce,” he said.
The former Personal Secretary of the nation’s founding father also spoke about the country’s thriving readymade garments industry.
He said the readymade garments owners were benefiting but they had always been indifferent when it came to the just cost of labour.
“It is not acceptable at all,” he said, adding that the ruling quarters had always ‘respected’ them.
“We have not been able to bring down the Bangladesh Garments Manufacturers Exporters Association (BGMEA) Bhaban despite an order from the top court; it is our bad luck. I believe the building should be demolished, if needed, by paying damages to the BGMEA.”
The former Bangladesh Bank Governor said no one had paid heed to his proposal to demolish the BGMEA Bhaban and transfer it to ‘Janata Tower’.
He said the $27 billion export income was a ‘tremendous achievement’ for Bangladesh.
“This huge amount has kept the base of our economy strong despite various obstacles,” said Farashuddin.
The founding Vice Chancellor of private East West University believes remittance by expatriate Bangladeshis played an important role to this end.
The Dollar issue
Although the former central bank Governor praised the government’s role in developing the macro economy, he differed with the policies of the Bangladesh Bank.
He believes the Bank move to maintain the value of the taka by buying dollars from the market is not a wise decision.
The analyst said the dollar had become a ‘thorn in the flesh’.
He fears the move might result in an increased supply of taka in the market, leading to higher inflation.
“That’s why I’ve said that it’s foolish to buy dollars from the market to raise the value of money,” he said.
According to the central bank, the foreign exchange reserve stood at $15.75 bn last week after paying $0.88 bn as the import bill dues of the Asian Clearing Union (ACU).
Bangladesh Bank has bought $0.91 bn from the market in the first two and a half months of the current 2013-14 fiscal.
It had bought $4.8 bn last fiscal.
Farashuddin expressed concern at the declining value of the Indian rupee.
“The rupee is depreciating against the dollar, while the value of the taka is being maintained by buying dollars from the market. India is allowing the dollar to gain as part of its plan to lure foreign investments in a big way,” he said.
As a result, the Bangladeshi market could become overcrowded with Indian goods, he feared.
“The prices of goods are increasing as taka continues to appreciate. On the other hand, prices will fall in India as the rupee is depreciating. It will result in an influx of Indian goods.
“We usually import a large quantity of goods from India. The amount will increase in future,” he said.
On Friday, the Reserve Bank of India bought dollars at Rs 63.78.
The rupee had been 68 to a dollar around a week ago.
According to the Bangladesh Bank, dollar was being sold at Tk 77.75 over the past four months.
Bangladesh had imported goods worth $5 bn from India during the last fiscal and exported goods worth just over $1 bn.
Media mum over private banks
“Several financial scams, like that of Hall-Mark, involving state-run banks, have pushed the banking sector towards instability,” he said.
Farashuddin said, as per his knowledge, corruption and irregularities in private banks were tenfold compared to the state-owned ones.
“But the media do not run reports on them. Those who own the private banks are also owners of media houses.
“Maybe, that’s why there is no news on the private banks,” he said.
’What is the huge reserve for?’
Farashuddin said the $16 bn reserve was another of the government’s achievements.
“An increase in export income and remittances and declining import costs had pushed the foreign exchange reserve up,” he said.
However, the former Bangladesh Bank Governor believes piling up the reserve would not do any good.
“Anyhow this reserve must be invested or else it will become a thorn in the flesh,” he said.
He said the government does not need to stock food beyond what is needed. “We have around 15 million tonnes of food crops in our stocks, thanks to bumper production. There will be no need to import food crops for the next one year,” Farashuddin said.
In that case, it would be foolish to keep a huge reserve.
’Monetary policy slowed growth’
He criticised contradictory monetary policies, saying they were slowing down GDP growth.
“Investment in the private sector must be increased and an expansionary monetary policy is needed for it,” Farashuddin said, reminding that the investment index was the worst among all economic indices.
“A kind of stagnancy is dominating the investment sector due to the looming national election. There is a large amount of idle money with the banks.
“The central bank should take initiative to invest the money with expansionary monetary policy,” he said.
Farashuddin said that monetary policy, should at best be used for taming inflation. “It is not right to bar growth with such policy.”
He said inflation rate was tolerable at present.
The former central bank governor suggested using the foreign reserve to increase investment in the country. He advocated the setting up of large power plants to meet the ever increasing demand for power.
“The reserve should be used here. The reserve should be brought in the productive sectors,” he said, adding there is no way other than investment.
Farashuddin said Bangladesh does not get that much FDI (Foreign Direct Invest) and emphasised taking up big local projects.
He recommended investing $2 bn in the Padma bridge project from the reserve.
“Constructing the bridge with the World Bank funding would have been best, which I said before.
“But since it is not possible, the reserve can be utilised here,” said Farashuddin suggesting funds can be collected from the expatriates offering them 40 percent equity.
“The main thing is that the reserve must be utilised. It has to be brought into the investment sector and that sector must be a production sector,” he said.
Source: Bd news24
