Head of the committee to investigate the irregularities and corruption in the country’s economic sector, Debapriya Bhattacharya, hands over white paper to Chief Adviser Professor Muhammad Yunus at the Chief Advisor’s Office in Tejgaon, Dhaka, on 1 December 2024BSS
A total of USD 234 billion or approximately Tk 28 trillion was siphoned off aboard during the tenures of the Awami League governments between 2009 and 2023, thus, an average of Tk 1.80 trillion was laundered annually. Corrupt politicians, businessmen, financial players, middlemen and government officials moved these funds during the Awami League terms
This estimation on money laundering came to light after the committee to prepare a white paper on state of economy in Bangladesh handed over the white paper titled ‘Dissection of a Development Narrative’ to the Chief Adviser to the interim government Dr Muhammad Yunus on Sunday. The Committee prepared the report based on the Global Financial Integrity Reports (GFIRs) and certain assumptions.
The White Paper said, “Over the recent past years, illicit financial outflows have emerged as an alarmingly growing phenomenon in Bangladesh, a malignant tumour that was devouring a significant part of the country’s economy and wealth.”
The average illicit outflow was equivalent to 3.4 per cent of Bangladesh’s current GDP (gross domestic products) or about one-fifth of export earnings and remittance inflows in the 2023-24 fiscal. The illicit outflows, on average, was more than twice the net flows of foreign aid and FDI flows over the corresponding period.
The head of the White Paper Committee 2024 and distinguished fellow of the Centre for Policy Dialogue (CPD) , Debapriya Bhattacharya handed over the White Paper to the chief adviser at an event at the Chief Adviser’s Office. Other members of the committee were also present.
The White Paper highlighted various aspects that include the banking sector, stock markets, looting of project funds and use of statistics on political motives. The report shed light on the macro economy saying GPD growth dropped and expressed concern over sleepwalking into the middle-income trap. The 397-page White Paper highlighted a total of 22 issues. These are development, GDP growth, inflation, public debt, domestic revenue mobilisation, public investment, food security, private investment, banking system, power and energy sector, external trade, poverty, inequality, human development, disability-inclusive development, gender issues, employability and labour market, remittance, environment and climate change, megaprojects, illicit financial outflows, declining national development, data ecosystem and development narrative, as well as a strategic outlook.
The White Paper delved into the money launderers, their methods, as well as the destinations of illicit capital flights. According to the White Paper, such outflows constituted a complex web of shadow economy that thrived on criminal activities of diverse nature and drew sustenance from an unholy alliance of sections of corrupt politicians, businessmen, financial players, middlemen, government officials, influence peddlers and wheeler-dealers of different types. A large part of laundered money was accumulated within the country through a range of illegal and criminal activities e.g. bribes and corruption, financial crimes, trade-mispricing, embezzlement of bank money and non-repayment of loans, rent-seeking, misuse of political power and influence peddling, over-costing of projects, share market scams, exploitation of migrant workers, tax dodging, drugs and human trafficking, and a host of other means.
Illicit financial outflows from Bangladesh were found to be destined to, or routed primarily through UAE, UK, Canada, USA, Hong Kong, Malaysia, Singapore, India, as also a number of tax havens. An increasing amount of stolen money was being converted to real estate, business enterprises and commercial activities of various kinds.
Citing various international research organisations, the White Paper stated that 532 property owners of Bangladeshi origin had real estate worth USD 375.0 million in Dubai. Bangladeshis owned a total of 972 residential properties in Dubai worth about USD 315.0 million. Till March 2024, Malaysian Second Homeowners of Bangladeshi origin numbered more than 3,600. According to the EU Tax Observatory Report 2023, the estimate of offshore financial wealth held by Bangladeshis was about USD 8.15 billion in 2021.
The White Paper said these resources can also originate in illegal activities and deals within the country for which payments are made abroad. While previously a large part of the ill-gotten money originating in the country tended to be invested in the domestic economy, forming a sizeable shadow economy, in more recent times, taking the money out of the country and keeping it abroad, in financial and non-financial assets, was considered to be a more secure way of guaranteeing a safe haven for the ill-gotten money.
The White Paper mentioned several reasons behind money laundering, and those are political indulgence and patronage, institutionalised corruption, legal impunity and overall lack of good governance in economic management. So, an uncompromising political will to address the problem is necessary.
According to the White Paper, approximately Tk 7 trillion has been allocated for procuring various goods and services, including the construction of roads, bridges, power infrastructure, hospitals, and educational facilities, among others. It is thus estimated that between Tk 1.61 trillion and Tk 2.80 trillion have been used as bribes and extortion at various levels, solely derived from public expenditure on development projects. Between Tk 770 billion and Tk 980 billion of these were simply bribes paid to government officials while between Tk 700 billion and Tk 1.40 trillion were extortions by politicians and their accomplices and the rest are spent on collusive payments. Most of them live aboard.
The White Paper compared the banking sector to a blackhole. The default loans of the banking sector amounted to Tk 6.75 trillion in the country, which is equivalent to the cost of constructing 14 metro rails or 24 Padma bridges. Banks were taken over in collusion with the state agencies over the one and a half decades. The next highest amount of money was laundered abroad. Banking sector saw the most corruption, destroying the sector.
At the event, Bangladesh Bank governor Ahsan H Mansur said the defaulted loans will reach 25-30 per cent in the banking sector, and a large portion of those loans was disbursed after 2017.
According to the White Paper, trillions of takas were embezzled from the stock market through fraud, manipulation, placement shares, and deceit in the IPO process. A major manipulation network involving influential entrepreneurs, issue managers, auditors, and a certain class of investors emerged. Stock market intermediaries suffered bankruptcy with negative equity of Tk 130 billion.
The culprits within the banking system are all heavy weights and the same heavyweights demolished confidence in the share market, the White Paper explained.
About USD 60 billion or Tk 7.20 trillion has been spent through the annual development programme (ADP) over the past 15 years, but USD 14 billion (23 per cent) or approximately Tk 1.61 trillion to USD 24 billion (40 per cent) or approximately Tk 2.80 trillion of it was wasted and looted in the name of development projects during this period, according to the committee to prepare white paper on the state of Bangladesh economy.
As muchas USD 14–24 billion (Tk 1.61–2.80 trillion) from annual development programme (ADP) and development projects has been lost to political extortion, bribery, and inflated budgets during the Awami League rule over the past 15 years. Misappropriation of funds during land acquisitions and the appointment of patronised project directors have further strained resources, undermining potential benefits from infrastructure and social investments.
The White Paper also raised objections to data and statistics gathered by the Bangladesh Bureau of Statistics (BBS), which had been a subject to political interferences. Tax exemption also equalled 6 per cent of GDP during the Awami League governments.
At the event, Debapriya Bhattacharya said the Committee worked independently without any inferences from the government. “The problem is deeper than we thought. The 30 chapters of this nearly 400-page long White Paper explained how the capitalist oligarchs were born and how they control the policy formulation.”
Committee member and former lead economist at World Bank Bangladesh, Zahid Hussain said various vanity projects got priority in the name of development during the Awami League government, and the interim government inherited and fragile economy because of the irregularities and lootings of that period.
Chief adviser’s press secretary Shafiqul Alam also shared the speech of Zahid Hussain on Facebook
Zahid Hussain said, “Self-satisfaction took away the vision of then-policymakers. Solutions to problems got no recognition. Our rules and regulations, as well as various local and national institutions, have fallen to pieces. The vicious circle of corruption has surrounded all levels.”
Referring to money laundering, leaders who become beneficiaries of the past government amassed huge money abroad with the help of the oligarchs. Statistics were used as the toll of political campaigns during the Awami League government, Zahid Hussain opined.
Headed by renowned economist, distinguished fellow of the Centre for Policy Dialogue (CPD) and convener of the Citizen’s Platform for SDGs, Bangladesh Debapriya Bhattacharya, the committee was formed on 29 August with the approval of the chief adviser of the interim government.
The other members are professor A K Enamul Haque, deputy vice chancellor, UCSI University, Bangladesh branch and director, Economic Research Group, Dhaka; Ferdaus Ara Begum, CEO, Business Initiative Leading Development (BUILD); Imran Matin, executive director, BRAC Institute of Governance and Development (BIGD); Kazi Iqbal, research director, Bangladesh Institute of Development Studies (BIDS); M Tamim, professor, Bangladesh University of Engineering and Technology (BUET); Mohammad Abu Eusuf, professor, Department of Development Studies and Director, Centre on Budget and Policy, University of Dhaka and executive director, Research and Policy Integration for Development (RAPID); professor Mustafizur Rahman, distinguished fellow, Centre for Policy Dialogue (CPD); Selim Raihan, professor, Department of Economics, University of Dhaka and executive director, South Asian Network on Economic Modeling (SANEM); Sharmind Neelormi, professor, Department of Economics, Jahangirnagar University; Tasneem Arefa Siddiqui, professor, Department of Political Science, University of Dhaka and founding chair, Refugee and Migratory Movements Research Unit (RMMRU), and Zahid Hussain, former Lead Economist, World Bank Bangladesh.
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An initiative has been taken to withdraw the upper ceiling on investment in wage earners development bonds for expatriate Bangladeshis. With this, the authorities aim to lure expatriate professionals and businesses to invest at home, clear ways for foreign investments, and increase inflow of remittances.
The expatriate welfare and overseas employment ministry issued a letter to Abdur Rahman, Khan, secretary of the internal resources division (IRD), on Wednesday, asking him to take action in this regard.
The wage earners development bond was introduced in 1981, with a maturity period of five years.
Asked about the issue, the IRD secretary declined to make any comment and claimed that he has not yet received any letter over the issue
According to the Wage Earners Development Bond Rules, 1981 (amended on 23 May, 2015), there was scope to invest any amount in the bond. However, during the Covid-19 outbreak, the IRD issued a notification on 3 December, 2020, imposing an investment limit of Tk 10 million (or its equivalent in foreign currency) on wage earners development bonds, US dollar premium bonds, and US dollar investment bonds.
The cap on US dollar premium bonds and US dollar investment bonds was lifted later on 4 April, 2022, allowing unlimited investments.
However, the investment limit for wage earners development bonds remains unchanged, with no provision for auto reinvestment. Hence, expatriates are being forced to withdraw their investments.
In its letter, the expatriate welfare ministry told the IRD secretary that the upper ceiling on investment should be abolished or relaxed to boost remittance inflows and attract more investment from expatriates.
On Tuesday, expatriate welfare and overseas employment adviser Asif Nazrul told the media that he proposed to cancel the ceiling of Tk 10 million on the purchase of wage earners development bonds.
“It needs the assistance of Bangladesh Bank, and I hope Bangladesh Bank will facilitate this,” he said, expressing optimism for more remittance in the coming days.
These bonds can be purchased from offshore and authorised dealer (AD) branches of Bangladesh Bank, exchange houses, exchange companies, and scheduled banks. Its profits are free from the tax net. Also, there are scopes to take loans against the bonds, and there is no requirement to have a foreign currency (FC) account to buy these bonds.
Foreign exchange earners themselves can invest in these bonds, or invest in the name of their nominee. Government employees who serve in Bangladesh missions abroad are also eligible to invest in Wage Earners Development Bonds.
It was learned that the IRD will present a summary of the proposal to finance and commerce adviser Salehuddin Ahmed for approval next week. Once it gets approval, the IRD will issue a notification, while the central bank and the national savings directorate will implement.
When asked about the matter at the secretariat on Thursday, adviser Salehuddin Ahmed told that the proposal should be submitted first before any further comments can be made.
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He believes that if these measures succeed, inflation will decrease. This would be great achievement if people’s anger and suffering are alleviated.
Ahsan H Mansur made these remarks at a roundtable discussion organised by Prothom Alo titled “Where do we want to see the banking sector?”
Ahsan H Mansur said that three task forces are being formed for the reform of the banking sector. One task force has already been established, and several measures have been implemented, including changes to the boards of some banks.
To improve the situation, 10 to 11 weak banks are now under regular supervision, he said adding these banks report on 20 specific issues to Bangladesh Bank every day.
The central bank governor said, “After implementing these measures, deposits in banks have increased by Tk 80 billion. This is a great relief. Once the liquidity crisis is resolved, we will move on to the next steps.”
Ahsan H Mansur noted that if the current trend in the dollar market continues, there will no longer be instability in the market. For the first time, the exchange rate for remittances in dollars is higher than the rate in the open market. The dollar market is stabilising.
The governor said, “Reducing inflation is my primary responsibility. Various measures are being taken to achieve this. Monetary policy is already stringent, and steps are being taken to make it even stricter. While there may be temporary difficulties for businesses, inflation will decrease, ultimately benefiting the overall economy.”
]]>The Bangladesh Bank (BB) has formed a task force for banking sector reform, with six experts on the financial sector as members of the taskforce.BB governor Ahsan H Mansur will serve as the coordinator of the taskforce.Apart from taking different measures to reform the banking sector, the taskforce will also publish a white paper.
The central bank disclosed this in a notification published on Wednesday.
The six members of the taskforce are chief adviser’s special envoy for international affairs Lutfey Siddiqi, former deputy governor Muhammad A Ali, BRAC Bank chairman Mehriar M Hasan, former lead economists at the Dhaka office of the World Bank Zahid Hussain, ZNRF University of Management Science vice chancellor M Zubaidur Rahman and Partner at Hoda Vasi Chowdhury & Co, Sabbir Ahmad.
According to the notification, this taskforce will mainly assess the existing financial situation, bad assets and major risks to maintain economic stability. Besides, the taskforce will conduct financial index review, assess actual conditions of the loans, actual price of assets, security deposit deficiency and will separate the bad assets of banks concerned.
The Bangladesh Bank said the task force will submit proposals related to limiting political and corporate influence on banking decisions, reform of bank ownership and development of the regulatory system under the process of strengthening good governance and risk management systems in the banking sector to achieve crisis time resiliency.
Besides, the taskforce will retrieve the money of the struggling banks, prepare regulations and related policies and will adopt separate policy measures for the weak banks.
The notification further said this taskforce will also amend different laws related to the financial sector, including the Bank Company Act and Bangladesh Bank Order and will propose for legislation, amendment and reform of laws regarding the asset management companies, bank acquisition and unification. It will also take measures to publish a white paper of the banking sector.
Following the ouster of the Awami League government, the interim government declared to form a bank commission for the reform of the financial sector. However, the government has formed a task force now.
The officials say the World Bank (WB) and Asian Development Bank (ADB) are providing loans for the banking sector reform. The money from the loan will also be spent on the modernisation of the central bank and enhancing its capability. At the same time, there has been an assurance of help from the International Monetary Fund (IMF) also.
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The United States is set to launch economic talks this week with Bangladesh’s interim government, including its leader, Muhammad Yunus, the Financial Times reported on Tuesday.
The government led by the Nobel Peace laureate was sworn in last month with the aim of holding elections in the South Asian nation after the ouster of prime minister Sheikh Hasina following deadly protests against quotas for government jobs.
“The United States is optimistic that, by implementing needed reforms, Bangladesh can address its economic vulnerabilities and build a foundation for continued growth and increased prosperity,” Brent Neiman, assistant US Treasury secretary for international finance, told the newspaper.
A delegation of treasury, state and trade officials, is expected to discuss Bangladesh’s fiscal and monetary policy and also the health of its financial system, the paper said. The talks will be held on Saturday and Sunday in the capital, Dhaka, it added.
Officials in Bangladesh’s finance ministry and Yunus’ office said they were not aware of the visit.
Bangladesh’s $450-billion economy has slowed sharply since the Russia-Ukraine war pushed up prices of fuel and food imports, forcing it to turn to the International Monetary Fund last year for a $4.7-billion bailout.
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A vast swathe of land was purchased at a cost of Tk 9 billion under the Padma Bridge project to fill sand for river training. But, rivers eroded a large portion of this land and erosion continues.
Responsible officials of the Padma Bridge project said there was no need to purchase that land, but the authorities concerned purchased these lands due to tactics and pressure of Noor-E-Alam Chowdhury aka Liton Chowdhury, who is a former chip whip of parliament and a cousin of former prime minister Sheikh Hasina, as he organised a movement on this matter at that time.
Locals said a portion of the land compensation money had been embezzled by faking ownership as there was no actual owner of char land, which was khas (fallow) land. Even portions of the compensation belonging to several landowners were also misappropriated.
The director of the Padma Bridge project at the time, Md Shafiqul Islam, told Prothom Alo that 60-70 million cubic feet (cft) of sand was extracted for river training and most of the char lands were filled with those sands. Though lands were acquired in char areas of Madaripur, sand was filled on the land by providing compensation to several local farmers in Shariatpur. He said the decision to purchase the land was taken with the permission of the high level of the government.
According to the Padma Bridge source, char lands in Shariatpur were filled by providing a compensation of 3.5 million to the locals. Similarly, sand filling also started in Madaripur, but several chairmen of the local union parishads, who were followers of Liton Chowdhury, instigated the farmers demanding sand filling after land acquisition. The government passed the Land Acquisition Act in 2017 incorporating provisions on a three-time compensation of the price for land acquisition by the government.
As work on river training stopped in the face of local protests, the road transport and bridges minister at the time, Obaidul Quader, was informed of the matter, and he also took the opinion of then-prime minister Sheikh Hasina. She was also informed that Liton Chowdhury also behind the local protests. Bridge Division sources said Sheikh Hasina ordered purchasing the land after hearing the matter. Finally, the project proposal was passed under special arrangements by adding Tk 14 billion more to purchase the additional land. A total of 964 hectares of char lands were purchased in the next couple of years since 2016.
Liton Chowdhury went into hiding since the student-people movement toppled the government on 5 August. Locals said former vice chairman of Shibchar upazila parishad and Awami League leader Atahar Bepari, chairman of Kathalbari union Sohel Bepari, chairman of Charjanajat union Rayhan Sarkar, chairman of Matbarerchar union Fazlul Haque Munshi and former chairman of Matbarerchar union Mahmud Choudhury were behind the protest against sanding filling. They all went into hiding.
Awami League’s Kathalbari union unit president also went into hiding. He over mobile phone the Bridge Authority first wanted to lease the char land for sand filling and they also paid lease money twice. They thought river erosion and loss of crop production might happen, so they prevented the sand filling. At that time, the Bridge Division agreed to acquire lands at the negotiation of Liton Chowdhury.
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Salehuddin, also the adviser to the interim government on the Ministry of Science and Technology, said that the board meeting of the EPB would be held soon where all things would be finalised.He informed that the EPB officials are working on finalising the export target and data reconciliation while all issues are likely to be approved there at the board meeting.
Salehuddin said that there was a gap between the export data of the Bangladesh Bank and the Automated System for Customs Data (ASYCUDA) of the NBR while the final data is being reconciled.On 3 July, the Bangladesh Bank (BB) released data of the Balance of Payments (BoP) for July-April period of fiscal year 2023-24. It used draft reconciled export data, which showed the country’s exports were nearly $14 billion below the figure reported earlier by the Export Promotion Bureau (EPB).
It showed that exports fell 6.8 percent during the July-April period although the EPB initially reported 3.93 per cent growth.Asked whether the reconciled export would put any impact on the GDP calculation, the Adviser said that the GDP calculation is usually based on production method where some 19 sectors are associated.
“So, hopefully, it will put no such impact on GDP …details can be informed later and you can also know about it later,” he added.Replying to another question on the possible government measures about the torn and dilapidated currency and bank notes especially denomination of Tk 10, Tk 5 and Tk 20, he said that it often happens as the countrymen quite often tend to mishandle their notes.
But, such mishandle of notes is not seen worldwide in case of the circulation of US Dollars, he cited.The former central bank governor said that he would raise the issue with the incumbent central bank Governor as old currency and bank notes could not be replaced right now unless the new notes are in place.
Responding to a question, he said that the present interim government has been acting promptly in various fronts as the provision for whitening black money has been repealed by the council of advisers recently.Besides, he said the central bank Governor has also been reconstituting various Boards of the banks to infuse dynamism in those.
Replying to another question, Salehuddin said the Planning Adviser would do all necessary things to revise the ADP where the ERD would extend all cooperation.He, however, said that the national budget would be revised and definitely be rationalized through annexing unnecessary expenditure.Asked whether such exercise would take place in this month or before the annual meetings of the World Bank and IMF Group, the Finance Adviser denied to make further comments.
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He made the call at a press conference on Wednesday, responding to a query regarding the group’s reported attempts to sell its properties.
“It needs to be carried out in compliance with legal procedures… We will request the government to take steps in this regard. Besides, no one should acquire the group’s properties, as the proceeds from their sale will be used to repay the depositors,” he explained.
The central bank governor described the group’s owner, Saiful Alam, as the first individual in history to have looted banks in a planned manner. “I have no idea if anyone else in the world has looted banks in such a well-planned way.”
Regarding reforms in the banking sector, Ahsan H Mansur said that a banking commission will be introduced within around a month, in collaboration with Bangladesh Bank and foreign specialists.
He also detailed their plans to buoy the Islami Bank, saying, “We have asked the new board of Islami Bank to submit their action plan within a week. This is not a place for sitting idle; it demands hard work. Bangladesh Bank will extend all sorts of assistance.”Ads by
He warned that the bank’s board might be changed again if it fails to fulfill its role effectively. “All are being monitored. None will be spared if they commit irregularities.”
He added that similar actions will be taken in the banks found with irregularities.
Regarding rising inflation, he said steps have been taken to control it. The dollar exchange rate has remained stable. If it continues, inflation is expected to decrease within the next six to seven months.
As the central bank is not offloading dollars, there is no risk of reserves going down. Even the government demands are being met from the interbank foreign exchange market. Therefore, the reserves are expected to rise in future, he added. The governor urged depositors to remain patient and avoid withdrawing all their deposits at once.
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Analysts said the past government borrowed heavily from local sources due to a lack of proper debt management. Economists and experts, however, always welcome taking foreign loans in foreign currency. But, foreign loans had also been taken heavily over the past 15 years, most of those being received without proper negotiations and scrutiny, resulting in a growing pressure of liabilities on the government.
The Finance Division officially released reports on foreign and domestic debts till December 2023 showing a total loan outstanding of over Tk 16.59 trillion. Debt reports are updated every three months and the March-June reports will be released soon. The Finance Division estimates the total foreign and domestic debt outstanding will be at Tk 18.36 trillion at the end of June – Tk 10.35 trillion in domestic debts and Tk 8.01 trillion in foreign debts.
According to data from the Economic Relations Division, foreign debts stood at USD 67.90 billion at the end of June or equal to Tk 8.01 trillion (USD 1 equals Tk 118). Total foreign debts outstanding were at about Tk 4.06 trillion at the end of December 2023.
As of December last year, the outstanding loans was equal to the allocation of three budgets. These loans are known as government or sovereign debts. This process involved borrowing, paying interest, paying capital and borrowing again. The money cited as outstanding is payable in future. At the end of December, total domestic debts stood at about Tk 9.54 trillion, and that includes a loan outstanding of over Tk 5.25 trillion to the banking sector and the remaining borrowings were against treasury bills, bonds, saving certificates and general pension funds.
An analysis of data from the Finance Division shows the domestic debt outstanding was over Tk 3.20 trillion at the end of December 2017 while the Awami League was also in power. Yet, such debts rose by three folds in just six years.
When the Awami League took office on 6 January 2009, foreign and domestic debt outstanding was at about Tk 2.77 trillion, mostly foreign debt outstanding. The scenario becomes the opposite at the end when the government leaves. However, the size of gross domestic product (GDP) increased during these times.
Now the pressure of payment of interest and repayment of capital of these huge debts falls on the incumbent government. Interest rates have also risen significantly recently. Interest on treasury bills and bonds rose to 6 per cent from 1 per cent two years ago. Currently, the average interest rate stands at 12 per cent. Sales of saving certificates are also low, but interests of debts taken previously against it are being paid with tax money now. As many as Tk 1.14 trillion was allocated in the budget for the 2024-24 fiscal to pay debt interests and Tk 930 billion was to pay interests of domestic borrowing.
The government borrows from domestic and foreign sources to meet budget deficits. Experts said foreign debts are easier, as well as have less interest and a long repayment period, but it comes with negotiation capacity, as well as terms and conditions. Quite the opposite, domestic loans are easier to get. The Awami League governments heavily deepened on domestic borrowings that long ignored the opinions of economists and experts.
Bangladesh Bank and commercial banks are the sources of borrowings in the banking sector. To borrow from Bangladesh Bank requires printing out new currencies, and it triggers inflation due to the rise in the supply of currencies to markets. According to the Bangladesh Bureau of Statistics (BBS), overall inflation was at about 12 per cent and food inflation surpassed 14 per cent in July.
Centre for Policy Dialogue (CPD)’s distinguished fellow professor Mustafizur Rahman told the past government relied on both foreign and domestic borrowings; both debts accelerated in the past 6-7 years, but domestic borrowings increased more. There were also reasons for this; tax collection was set at 14 per cent compared to GDP in the seventh five-year plan, but it did not happen. In contrast, this ratio dropped from 8 per cent to 11 per cent, which means the government could not reach the affluent for tax or did not want to do so, and this is the old sin. Had the target of tax collection been met, this huge debt would have not been needed at all.
Mustafizur Rahman further said, “We speak proudly for building the Padma Bridge with our funds, but it was too built on loans. The pressure of loan paying is coming. Suppliers credits have been in such an unplanned way and almost without any negotiation, now it will be felt to the bone. Paying of interests for the loans of the Rooppur Nuclear Power Plant project will have to start after two years.”
According to data from the Economic Relations Division (ERD), the burden of foreign loans increased threefold in the past 15 years. External debt accumulation was at USD 20.84 billion. The Awami League government borrowed from various countries including India, China and Russia, as well as various donor agencies on tough conditions to build a tunnel under Karnaphuli river, Rooppur nuclear power plant, elevated expressways, as well as for rail and power sectors.
The foreign debt accumulation rose to USD 67.90 billion after the 2023-24 fiscal ending in June this year, which means there is an average debt of about USD 4000 per citizen.
Though the Awami League governments borrowed heavily on the pretext of developing infrastructures in the country, they too had been under pressure to repay the debts over the past couple of years. The pressure mounted at a time when a crisis of foreign currency has been on for quite some time. Additional pressure also falls on the budget along with the foreign reserves due to spending extra money for loan repayment.
According to sources, one-third of the foreign borrowings that the government receives every year are spent on the payment of previous debts and interests. Payments of foreign debts rose by 25 per cent in the 2023-24 fiscal from the previous fiscal.
ERD sources said payments of interest and capital on foreign debts reached a record of about USD 3.36 billion in the last fiscal. Of which, USD 2.01 billion was for repayment of capital and about USD 1.35 billion was for payment of interest. Payments of interest and capital on foreign debts increased to USD 2.68 billion in the 2022-23 fiscal from USD 1.10 billion a decade ago in the 2012-13 fiscal.
Payment of loan installment for the Rooppur nuclear power plant project will start in 2026 with negotiations underway to extend the grace period for two more years. Talks are pressing on reducing loan instalments for various Chinese projects. Dhaka adopted a ‘go-slow’ policy on the about USD 5 billion loans taken on Chinese currencies, and a Chinese delegation was scheduled to visit Dhaka in August to discuss about this debt, but it has become uncertain now.
The new government, however, advised the officials to follow caution on foreign borrowings. Finance advisor Salehuddin Ahmed held a meeting with the ERD officials on this matter on 14 August and directed the officials to scrutinize interest rates, instalments, payment periods and various terms and conditions while taking foreign loans.
The finance advisor told the journalists on that day, “All are interested in lending to Bangladesh, and I asked the ERD officials to scrutinise the loans before taking those because we have witnessed the tragic consequences of many African countries which borrowed randomly.”
]]>The banking sector regulator, Bangladesh Bank, issued an instruction in this regard to the managing directors of the banks on Saturday.
In its message, the central bank said as the banks are facing issues in transporting cash to branches, it will not be allowed to withdraw more than Tk 300,000 from a single account this week. Also, monitoring activities should be strengthened on transactions, and any suspicious transactions should be stopped.
However, there will be no limit for transferring money from one account to another and for digital transactions.
The interim government began its journey on 8 August, but the police are yet to resume their activities in full swing. This posed significant security concerns, particularly in transporting cash. Besides, there were apprehensions that the vested quarters might attempt to destabilise the situation by withdrawing large amounts of cash.
Against the backdrop, the maximum limit for cash withdrawal was Tk 200,000 in the previous two weeks. An official of Bangladesh Bank explained that the decision aims to foil any attempts to destabilise the situation as well as to address the security concerns. The limit will be lifted completely in a gradual process.
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