Why 2012 reforms were not done is a million-dollar question
It has not been possible yet to implement the reforms that are absolutely essential to build a healthy macroeconomic system in Bangladesh because of the government's lack of political will, pressures from vested interests in the private sector and bureaucratic complications.
However, the economy has now been battered to a point, when these reforms must be done for the sake of macroeconomy, there are no alternatives – or else, the risks in the overall economy will go beyond our capacity to mitigate.
It is important to implement all the reforms the IMF suggested for macroeconomic stability. The current government, and whichever government comes next after the ensuing election, must continue with the reforms.
Bangladesh earns about $70 billion a year from exports and remittances, so, in perspective, even if it doesn't get the $4.7 billion from the IMF, it wouldn't be that big of a loss. But if these reforms are not done, the crisis of our economy will only deepen in the coming days.
Even in 2012, the IMF called for such reforms and the government was committed to executing those. But why those never manifested is a million-dollar question. Well, it cannot be answered in a sentence.
The reforms were not possible mainly due to four reasons – First, the government wanted to take the pressure on its own shoulders by increasing the subsidy many times to provide relief to the people. Second, the government refrained from reforming under pressure from various powerful groups in the private sector. Third, the government shied away from taking tough political decisions needed for reforms and fourth, bureaucracy as losing power is not something the bureaucrats prefer.
When the government steps up to reduce bank defaults, the powerful and unscrupulous business groups that are not repaying huge sums of bank loans, stand in the way. Similarly, fiscal reforms were blocked by wealthy businessmen.
For the past 30 years, I keep hearing the government talking about easing the business environment. Both the government and businessmen want it but it is not possible due to bureaucracy. I have been hearing for 20 years that all services to traders will be brought under one umbrella. The law has been passed, but it is not being implemented, because the bureaucrats do not want to let go of their authority. Therefore, these reforms will not be possible without the strong political decision of the government.
Reforms also require money. Our budget is 15% of the GDP – ideally it should be 25%. To fill this gap, revenue and investments should increase. Only then will it be possible to increase social protection by lifting subsidies. That is what the IMF said and we have been feeling the same for a long time. Our main step should be to increase earnings. Expenditure cannot be increased by borrowing.
People will object to decisions of cutting subsidies – it is only normal. Because, their expenses will increase. That said, if you look for the real reason for the large losses and the need for subsidies in state-run sectors including gas, electricity and energy, corruption is one of the main reasons. If corruption can be reduced, the pressure of government subsidy will also ease a lot. Corruption is driving up gas-electricity prices.
While the Anti-Corruption Commission is trying to reduce corruption, it cannot be said that they are able to do their part properly.
Mahbub Ahmed, Former Senior Secretary, Finance Division, shared his take on the IMF reform conditions as he spoke with TBS Special Correspondent Abul Kashem.