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Mirza Nahid Hossain:
Currently there is a slogan of globalization. Globalization is a step forward in the era of information flow. Democracy is very popular in global political journey. Even if the regime is in place, it is going to fail due to various reasons. After the collapse of the Soviet Union, statesmen began to step forward with the conviction of establishing democracy, but constantly began to stumble on that journey. The world system began its journey with the kind of political crisis towards the end of the 20th century, but in the 21st century, a different kind of crisis continues to attack the world system.
Bangladesh could not attract the world’s attention in the post-independence period, it is undeniable that the current Bangladesh is considered important in the discussion of development, democracy and geopolitics in some way by the powerful countries of the world. But in the decades after independence, Since there are foreign investments in Bangladesh, foreigners may intervene if there is a situation of damage. The foreign representatives visiting Dhaka wanted to convey such a message in the meeting with the government officials.
Bangladesh’s geographical proximity to China and regional power India and the rivalry between these two countries in the region including South Asia have added a new dimension to the discussion about Bangladesh. Bangladesh is the second largest economy in South Asia. Therefore, the side of Dhaka in South Asia will have a heavy stake, both China and India are trying to keep Bangladesh close to this policy.
Considering this, Bangladesh is gaining importance in recent times to other global powers including the United States. Despite various problems in the state structure and political instability, Bangladesh has been able to attract the international community through economic and social development in the last few decades.
The $4.7 billion from the International Monetary Fund (IMF) is not enough to mitigate the risk of a liquidity crunch. The IMF’s 42-month program has taken away some of the government’s policy-making freedom. However, this program does not seem to be able to solve it by identifying the root cause behind the downward pressure of the economy. The source of this pressure is linked to the political settlement. However, increasing the prices of various services in compliance with IMF conditions has increased the cost burden on fixed income, poor, lower and middle class people and producers. The business organizations are complaining about the lack of gas supply in the factories. Due to the lack of foresight, this pressure has been created in energy security. The sector’s problems are unlikely to be resolved immediately due to import dependence for primary fuel supply, low gas extraction, lack of progress in the use of renewable energy and insufficient investment in transmission systems despite the high-rent infrastructure of the energy production sector. On the one hand, the additional cost of energy, on the other hand, the huge amount of capacity charge has made it impossible to reconcile the cost of power purchase with the money proposed in the budget. Debt payment is accumulating.
Foreign debt repayments will be most affected by the appreciation of the dollar. At the end of the financial year 2020-21, the foreign debt of Bangladesh was 60.15 billion dollars. It was $51.13 billion in the previous fiscal year and was up nearly 18 percent in a year. It is estimated that by the end of 2023, the foreign debt of Bangladesh will increase to 115 billion dollars. Businesses are suffering losses due to devaluation of the dollar and commodity prices. Along with the increase in prices, the amount of bank loans of the businesses is also increasing. On the other hand, the growth of deposits in the banking sector has come down. Banks are forced to borrow at higher rates to maintain their cash deposit reserve ratio (CRR) and statutory deposit ratio (SLR). Developed countries have pushed economies into recession by adopting contractionary monetary policies to control inflation. The exporters fear recession due to the decrease in the purchasing power of the common people in those countries. After the negative growth in the last financial year, the flow of remittances is not very promising in this financial year as well. As a result, from July to February, that is, in the last eight months, the overall balance of transactions in the foreign sector has reached negative 7.949 billion. Note that the overall balance at the end of June 2021 was 9.274 billion dollar surplus.
Productivity in agriculture has been severely disrupted and production costs have increased. As the fertilizer market is going through volatility. There is also a risk of decline in agricultural production due to rising prices of agricultural inputs and falling supply compared to demand. Innovation and technological advancements in agriculture did not come after the Green Revolution. Productivity in agriculture has declined and production costs have increased. Despite the best track record in repayment of loans, farmers’ financing is inadequate compared to the requirement. Small, medium and cottage industries are still neglected despite creating the most employment opportunities. There is a shortage of skilled manpower in the service sector.
The fiscal balance of the state is facing challenges. Bangladesh’s global position in terms of tax-gross domestic product (GDP) ratio is at the very bottom. Due to the small amount of taxes, the budget size of Bangladesh is also smaller than that of the peer countries. As the tax-Gross Domestic Product (GDP) declines more recently, debt dependency and overall debt levels are increasing. The amount of government loans taken from the central bank has risen to a new record of more than 1 lakh crore taka. The amount of debt in the public sector stands at 3 lakh 34 thousand crores. More and more printed money is entering the market due to borrowing from central banks. Overall inflation is rising due to price hikes at the consumer level. Besides, there are also questions about the effectiveness of development expenditure and cost escalation. Projects can become burdensome if costs are not tightly controlled.
Major changes are required in the incentive scheme and subsidy structure. The current ongoing system should be abandoned and a performance based conditional incentive scheme should be adopted. Employment generation or export earnings can be criteria. Common people need cash as needed. Over the years, it has been said that the safety net programs that are spread across the livelihood crisis should be brought under a single and integrated administrative umbrella. The combined huge sums of the programs can be effectively deployed by those who have done NID, making it a national imperative to build a national population database to go to the right households.
Unfortunately the economy is under chronic downward pressure. Addressing protracted downside risks and transitioning requires moving away from rhetoric and complacency and acknowledging the importance of the challenges. It is also necessary to identify the centers of downward pressure and formulate effective, implementable strategies. The government needs to send the message that it is taking the necessary steps to address the lingering downward pressure to keep the economy from collapsing. The decision is purely political and a wrong move in the political settlement can create social unrest.
If this trend continues till the end of 2024, the debt burden of Bangladesh will exceed 130 billion dollars. Due to various reasons including lack of understanding of conditions and various types of errors in signing foreign loan agreements, various irregularities and corruption in project preparation, approval and supervision, bureaucracy of development partners. Slow growth in value added tax (VAT) collections is indicative of contraction in economic activity. Increase in prices of goods and services is the reason for little progress in collection of consumption tax. Due to restrictions on imports and shortage of foreign exchange, banks are not able to open loans as per demand. As a result, the amount of import and import duty collection is also decreasing. When the price of goods increases, so does the trend of tax evasion. The size is especially large in trade. Money laundering occurs through over invoicing. Increasing revenue collection is the biggest need for the government. This can be achieved if the government can prevent tax evasion and evasion. A tailor-made tax reform program is essential in this regard. If income tax can be established as the main source of internal wealth formation, it is possible to achieve sustainable revenue system by expanding the financial capacity of the government. Fiscal scope will be created only if the National Board of Revenue (NBR) can achieve the agreed target of income tax collection as the main source of domestic resource collection.
A country can never cope with external pressures when patronage-based nepotism politics tends to create power asymmetries and exploit the ruling elite to the exclusion of the majority of the population. Political settlements influence economic outcomes through power. Centralized power automatically creates tyranny. Centralization of state power also renders policies ineffective at the implementation level. As a result, inequality widens and the rate of poverty reduction slows. In this situation authoritarianism leads to creating an unjust society. The state has been oppressive since its inception. When the political settlement does not belong to the majority, ‘clientelism’ or factionalism prevails. Clan system collects unearned wealth (rent). Primitive concentration of wealth continues through abuse of power and coercion. Wealth-based syndicates establish control over banking and other systems through institutionalization and political centralization. As a result, institutions fail to deliver services to citizens and the concept of the citizen-state becomes a distant self.
The Russian Embassy in Dhaka made a suggestive statement amid a recent controversy over the US ambassador to Bangladesh, indirectly accusing the US of ‘blackmail and trying to dominate’. With this indicative statement, Russia is indirectly supporting the activities of the Bangladesh government. Since the 2014 elections, the US and Western countries have criticized Bangladesh, but China, India and Russia have not. If we consider the political characteristics of Russia and China, in those countries also some kind of authoritarian government is running the state. We can easily assume that the Awami League government is very much dependent on China and Russia, the democracy, human rights, Increasing levels of authoritarian rule over the people and opposition political parties with little heed to the voice of the people to return their right to vote. They even do not shy away from making many negative comments about the United States. But it remains to be seen how successful the United States will be in the end.
Although India, China and the United States are trying to expand their influence in Bangladesh, each state has the purpose of achieving their own interests, but as a democratic state, efforts to establish a democratic government through the free exercise of people’s voting rights are very necessary. The role of China and India is to rob the sovereignty of the people of this country. The US role in that regard is an attempt to restore people’s sovereignty. People should join the fight to save this effort. Or it won’t take long for the expansion of authoritarianism to dissolve democracy forever and become a perpetual authoritarian state like North Korea. Unfortunately, Foreigners have been talking about compromise since before the elections, neither the government nor the opposition parties are listening to this. So it is high time for all should be cool and diplomatic.
Author : Researcher and Columnist