The new government takes office at a time when Bangladesh’s banking sector is adrift after years of widespread plunder. The country is burdened with debt. The treasury is short of funds. Revenue collection is weak. Factories are issuing closure notices. High interest rates are stifling investment.
Employment remains stagnant. Citizens are struggling with high inflation. Small and large businesses alike feel neglected and deprived. Over the past year and a half, the business community has reportedly been among the hardest hit. Confidence drained away, and many pulled back from investment and expansion. As a result, the wheels of the economy have not turned at the desired pace. Many were waiting for the return of a political government to restore confidence and allow them to refocus on enterprise and investment.
For all latest news, follow The Daily Star’s Google News channel.There is a widespread belief that the new government will prioritise restarting the engine of the economy by rebuilding business confidence, meeting entrepreneurs, consulting them and urging them to join hands in national recovery.
Recent discussions with entrepreneurs across sectors reveal a shared concern. Steering the economy back to a path of sustainable growth will be the biggest challenge for the new government. The accumulated irregularities of the past decade and a half, systemic plunder in the banking sector and institutional corruption have caused severe economic haemorrhage. The government must adopt a transformative and multidimensional strategy to halt this decline.
Conventional reforms will not suffice at this critical juncture. Structural transformation of the state apparatus is required. A major step should be restructuring the banking sector. If the government ensures genuine autonomy for the central bank, discipline in loan disbursement can be restored and the culture of default loans curbed. To ease the liquidity crisis and reduce high interest rates, banks must strengthen capital adequacy and governance so that depositors and small entrepreneurs regain trust in the system.
If the government advances to the next phase of digitalisation, ensuring a paperless economy and full automation, the cost of starting and operating businesses could fall significantly. To attract foreign investors, legal safeguards and rational tax incentives are essential. It is equally important to ensure an uninterrupted energy supply for industrialisation, while reducing import dependence through domestic energy exploration.
The government needs to ensure a competitive market environment where small and medium enterprises can compete fairly with larger firms. If supply increases, prices are more likely to stabilise. Greater transparency in state-owned enterprises and wider use of technology to reduce middlemen dominance in supply chains could also help.
Bangladesh’s tax-to-GDP ratio remains among the lowest in South Asia. To raise revenue, many suggest expanding the tax net rather than increasing tax rates. At the same time, strict oversight of mega-project spending amid allegations of waste and corruption, along with expenditure rationalisation, could reduce the budget deficit.
A government committed to accountability and regular dialogue with business leaders, and able to offer swift solutions to real problems, could quickly dispel the cloud of mistrust and set Bangladesh on a path towards stability.
An economic recovery “crash programme” should be prioritised. The greatest emphasis must be placed on tackling unemployment, inflation, energy shortages, foreign currency liquidity constraints and improving the business environment.
The new government should also curb manoeuvring and manipulation in the capital market and ensure credible governance. The tax collection system should be fully digitalised and automated to create a genuinely business-friendly regime. To address post-LDC graduation challenges, export diversification is essential. If special export incentives are extended to sectors such as IT and software, leather and leather goods, light engineering and agro processing, the export basket could expand. The government should set out and begin implementing an Emergency Economic Recovery Roadmap within its first 100 days.
The writer is an economic analyst
https://www.thedailystar.net/business/economy/news/economic-priorities-the-new-government-4106161