IMF reform suggestions reasonable

The amount of loans taken from the International Monetary Fund in 2012 was very small, considering the size of our economy and Bangladesh's quota for the IMF Special Drawing Rights (SDRs). The financial situation of the country at that time was not as bad as it is now. Basically, the government took that package from a relatively good position to ensure several reforms in the financial sector.

A few of the reform initiatives, taken under the package, made some progress. But as the government failed to execute a substantial number of reform initiatives, the entire amount of that package was not released.

Now it is important how much of reforms we feel necessary and how much we own these reforms. As our economy is going under a pressure, now is the proper time to take these reform steps.

Now, the question is how many conditions of the global financial organisation will we accept to get this loan. It depends on how necessary we consider these reforms for ourselves.

We may not be able to take one or two instalments if there is more pressure of conditions that we will be unable to comply with. However, ensuring reforms is needed for the sake of the country.

If reforms such as domestic resource mobilisation, control of defaulted debt, opening up of currency exchange rate and interest rate had been ensured in accordance with the conditions of the previous programme, the country would not have been in such a crisis as it is now.

Now gas price, electricity prices have to increase drastically. At the same time, the amount of subsidy has to be reduced quickly. If some adjustments had been made beforehand gradually, the pressure on consumers and industrial entrepreneurs would not have increased suddenly.

Proper reforms would have ensured policy flexibility, particularly in terms of public expenditure. If revenue collection had increased, tax and loan defaulters could have been tackled and there would have been no resource constraints to deal with the ongoing global crisis.

I think many of the recommendations that came with the new package are reasonable. Initiatives like leaving the exchange rate to the market, removing the cap on the interest rate should have been taken earlier. There are talks of strengthening the NBR and reducing bad loans. If these are done, our economy will be strong. Then allocation to social security, education and health sectors will not face any problem.

That said, everything depends on the political will and commitment of the government.

Professor Mustafizur Rahman, Distinguished Fellow, CPD