The ongoing economic upheaval is mainly due to the longstanding structural problems, lack of good governance and absence of reforms, economists said yesterday.

“Most of today’s problems are almost the same as 30 years ago when the CPD launched its first independent review of Bangladesh’s development in 1995,” said Rehman Sobhan, the chairman of the Centre for Policy Dialogue.

The suggested issues discussed in that meeting were repeated in CPD’s annual and bi-annual discussions over the years.

Those have moved from symptomatic illnesses to cancerous problems, he said in a dialogue styled “Economy in Crisis: what should be the work plan?”, organised by CPD at the capital’s Brac Inn Centre.

“Can there be any legitimate expectation that these problems will be addressed in anyone’s lifetime? Because these have gone so deep now.”

One such structural issue lies in the banking sector: short-term deposits are used for long-term finance.

“This is one of the most dangerous structural problems. You are borrowing from lower-income people and lending to the better-off segment of the society who are not repaying the loans.”

So, effectively the government is subsidising the low-income group and the low-income group is subsidising the upper-income groups through the perpetuation of default loan culture, Sobhan added.

“From the regulatory side, Bangladesh Bank has a soft touch or no touch, so the problem of default loans and lack of governance in the banking sector remains,” said Ahsan H Mansur, chairman of Brac Bank.

Economists have been calling for corrective action for years but the government did not pay heed.

He cited the case of policymakers in neighbouring India, who deftly managed the issues there. In India, the exchange rate was adjusted slowly, but in Bangladesh, there was a sudden large depreciation, which hit the economy, said Mansur, executive director of the Policy Research Institute.

To mitigate inflation, the Indian central bank reacted proactively. So inflation is near 5 percent in the neighbouring country, whereas Bangladesh is grappling with inflationary pressure, said Mansur, a former economist of the International Monetary Fund.

Planning Minister MA Mannan said the real requirement of rural people and the perceived requirement of the economists do not match.

The government’s main goal is linked with the rural people’s requirement and these are reducing hunger and poverty, he added.

Sobhan, however, countered Mannan.

“CPD hears the voices of the rural people through the Citizen’s Platform for SDGs, Bangladesh. Once upon a time, it was said we are out of touch but now we are in better touch. We are neither blind nor foolish and we are fully aware of the positive achievements which take place.”

Sobhan also chastised Finance Minister AHM Mustafa Kamal for keeping a low profile during the economic crisis.

“He is like that variance of a lotus flower that blooms only at a particular time of the year. We will be waiting for the lotus to bloom again to resume the conversation on the economic situation,” he added.

The central bank hints at a contractionary monetary policy to contain inflationary pressure but does the opposite, said Zahid Hussain, former lead economist of the World Bank’s Dhaka office, citing the BB’s frequent participation in the repo market that increases the money supply.

A repurchase agreement (repo) is a form of short-term borrowing for dealers in government securities.

The government also borrowed more than Tk 30,000 crore from the central bank until last month, indicating it is printing money and fuelling inflation, he said.

Through refinance scheme, the government is giving money to the market too.

“There should be coordination in planning and execution,” Hussain added.

The crisis in the banking sector is not because of the pandemic or war but due to a lack of good governance over the years,” said Salehuddin Ahmed, a former BB governor.

“The central bank is now regulating with a soft hand instead of becoming strict about the rules.”

He cited the case of rescheduling large loans by paying an advance of 2 percent and increasing the number of family members allowed in a bank board from two to five.

“It was a very sad step,” Ahmed added.

Companies’ business plans have been disrupted by the fluctuating exchange rate, said Rupali Chowdhury, managing director of Berger Paints Bangladesh.

The raw material prices rose but the businesses could not pass the burden to the consumers fully. When the prices were raised slightly, the demand dropped.

The ongoing economic crisis would require the policymakers to make tough policy decisions to return discipline in macroeconomic management and economic governance, said Fahmida Khatun, executive director of CPD.

Naser Ezaz Bijoy, president of the Foreign Investors Chamber of Commerce and Industry and Shameem Haider Patwary, member of the standing committee on the ministry of law, justice and parliamentary affairs, also spoke.