Business bodies acted like puppets under AL govt: BB governor
Vested interest groups major obstacles to banking reforms, he says.
Bangladesh Bank Governor Ahsan H Mansur today (27 January) criticised the role of business organisations during the previous Awami League government, saying they acted "like puppets" and failed to speak out on key economic issues.
"When interest rates were fixed at 6% to 9%, they [businesses] applauded. When money was being siphoned off abroad, they remained silent. If business bodies behave like this, democracy can never become strong," he made the remarks at a roundtable in Dhaka.
The roundtable, titled "Implications of LDC Graduation for the Banking Industry: Bangladesh Perspective," was organised by the International Chamber of Commerce (ICC) Bangladesh.
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The event, moderated by ICC Bangladesh President Mahbubur Rahman, was attended by business leaders and bankers, many of whom argued in favour of delaying Bangladesh's graduation from Least Developed Country (LDC) status.
In response, the governor said, "Bangladesh must prepare itself across all sectors for graduation. I don't see Bangladesh in the same category as countries like Afghanistan. We are now comparable to Thailand, Malaysia, or India."
He further said LDC graduation is inevitable, whether today or tomorrow, and requires targeted policies for human resource development, monetary and financial systems.
"Policies alone are not enough. Skills must be developed. Logistics, connectivity, ICT, education, and healthcare all need improvement. We should not sacrifice long-term gains for short-term benefits," he added.
Mansur acknowledged that interest rates are currently high but said, "Single-digit rates have historically been rare in Bangladesh. Between $20 billion and $25 billion had been drained from the banking system, leading to a rise in non-performing loans and inevitable tightening."
"Deposit growth had fallen to 6% at one point, but it has now rebounded to 11%. This has had an impact on interest rates," he said, adding that better governance, supervision, and customer confidence would help bring rates down.
The governor claimed that vested interest groups have become major obstacles to banking sector reforms. "Several laws had been sent to the interim government, including the Bank Resolution Ordinance and the Deposit Insurance Ordinance, both of which have already been passed.
"These laws have enabled the merger of five banks and initiated the liquidation process of nine NBFIs," he said. However, he expressed frustration that the Bangladesh Bank Order remains stuck at the finance ministry despite being submitted nearly four months ago.
"This law is crucial to protecting institutions from future political interference," he said. "If we want fundamental reform in the banking sector, we must resist groups that are trying to block these changes. Otherwise, we risk sliding back to where we were before."
1.2m jobless due to strict monetary policy: AK Azad
Ha-Meem Group Managing Director AK Azad speaking at the event said tightening monetary policy has already left around 1.2 million people unemployed and warned that another 1.2 million could lose their jobs in the next six months.
He said managing the economy solely through monetary policy is not feasible without boosting investment and employment. "Without increasing investment and employment, it is not possible to manage the economy only through monetary policy," he said.
Referring to a research paper, AK Azad said exports to the European Union could decline by as much as 45% once Bangladesh graduates from least developed country (LDC) status.
He also said that due to a slowdown in the ready-made garment sector, non-performing loans have risen to around 30%, which could further weaken exports and create a liquidity crisis through systemic pressure.
"Currently, the default loan rate in state-owned banks stands at about 50%, while in private banks it averages around 30%," he added.
Azad further said the private sector has so far taken only 6% of bank loans, while government borrowing accounts for 27%, a figure he warned could rise to 32% in the future.
