The ousted government’s high bank borrowing, rising non-performing loans, pegged exchange rate, interest rate cap, and inconsistency with international banking regulations have all contributed to the current reserve and liquidity crunch the country is experiencing. However, the actual condition of Bangladesh's banking sector is even more fragile than that.
During a Centre for Policy Dialogue (CPD) discussion, titled “Challenge and Action for Interim Government” on Wednesday, it was highlighted that due to the recent unrest in Bangladesh, the LC opening credit line facility of around $6-7 billion from various banks around the world remains suspended. Discussants emphasized the importance of making quick decisions regarding the major issues facing the banking sector, especially with the country's upcoming LDC graduation.
Selim RF Hussain, chairman of the Association of Bankers Bangladesh (ABB) and managing director & CEO of Brac Bank PLC, said: “The banking sector has become fragile in the last 15 years during the rule of the Sheikh Hasina-led government, and the situation is even worse now than one can imagine. You see the names of some banks in the newspapers, but there are many others that remain undisclosed.”
“We must immediately work to restore the credit lines that the Bangladesh banking sector previously enjoyed, amounting to $6-7 billion or more globally. All of these lines are currently suspended,” he added.
It is worth noting that a line of credit generally allows you to resolve your debt, while a letter of credit is literally a promise to pay as soon as possible, with no revolving debt. A letter of credit is issued with a specific beneficiary in mind, whereas a line of credit can be used to pay multiple different companies.
Arshad Jamal Dipu, vice president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), pointed out that the chief advisor of the interim government has experience in microcredit, and he urged the government to extend similar facilities to readymade garment workers. He also called for TCB goods trucks and OMS commodities to be available at major industrial hubs across the country to alleviate the pressure of mounting inflation on workers.
Regarding the interim government, he stated that the RMG sector is ready to assist the government with its expertise on various issues.
In his speech, AKM Fahim Mashroor, co-founder and CEO of bdjobs, urged the interim government to prioritize micro, small, and medium enterprises (MSME) entrepreneurs, noting that these entrepreneurs deserve loans and other assistance from banks, although only a few banks currently provide them with such support.
He also said that a large amount of foreign currency is being earned by the expatriate workers but there is no formal channel to provide them loans, which has them source money from informal channels. The interim government should focus on providing loans to them.
Regarding technological advancement, he said that they thought technological advancement might help the people to become more democratic and might empower them.
“But in the last 15 years, technology was being used to curb human rights by using spy software, tapping phone calls, developing controversial institutions like NTMC and introducing controversial laws like DSA or CSA,” he added, saying that the government should put a stop to all these.
BGMEA Director Shams Mahmud said that there have been many irregularities in the finance sector, like banks, BSEC, bonds market, as if there was no rule of law. He urged that these issues be addressed immediately.
Regarding LDC graduation, he said that it is important to prepare a white paper in this regard.
“There are major mismatches in the data on which the economic status was shown earlier. So, a white paper should be prepared on the actual economic scene, which will be voted on. If a majority agree, LDC graduation can be delayed by 10 years or 15 years,” he added.
In the context of factory security, he said that they don’t want to see the old wine in the new bottle.
“Already many local miscreants have called many factory owners, asking to be given control of the jhut business. We want these activities stopped immediately,” he added.
He also called for a freezing of the accounts of bank directors and banning them from travelling abroad. They must account for each penny and then they can go abroad with money.
Labelling him the leader of corruption, Shams Mahmud demanded the resignation of the NBR Chairman Abu Hena Md Rahmatul Munnem and said that he had destroyed the tax system.
Meanwhile, the government has removed Abu Hena Md Rahmatul Muneem from the post of chairman of the National Board of Revenue (NBR). The public administration ministry issued a circular on Wednesday afternoon cancelling his contractual appointment and relieving him of his duties.
CPD Distinguished Fellow Professor Mustafizur Rahman said that the country’s economy, investment, banking sector, supply system and other economic components witnessed a major inconsistency and fell into a vicious cycle.
“Although Bangladesh faced and overcame enormous challenges in the last 53 years, when the country has faced a situation of strong accountability and establishing an inclusive society, it lost its way,” he added.
“The interim government will face a number of challenges in recovering the economy of the country, which include curbing inflation, import capability, investment capability, employment,” he added.