Losses from overvalued taka, multiple exchange rates to take long to recover: Farashuddin
The former governor pointed out that despite an average of 12 lakh people leaving the country annually, remittances have not increased due to multiple exchange rates
Overvalued taka, capped interest rates, and multiple exchange rates have inflicted major damage to the economy in the long run, said former governor Mohammed Farashuddin on Thursday (16 May).
"Overvaluation of taka for the last 10 years, 6% to 9% interest rates in two and a half years, and multiple exchange rates have done the country a lot of damage, and it will take a long time to come out of this," he said at the launching of his book "Bangladesh's Future Development: Agenda for Reform".
Farashuddin pointed out that despite an average of 12 lakh people leaving the country annually, remittances have not increased due to multiple exchange rates.
He also noted that no public project should be undertaken without pre-feasibility tests.
Keep updated, follow The Business Standard's Google news channel
The event is jointly organised by Bangladesh Institute of Development Studies (BIDS) and East West University.
Commenting that it is time a provincial government system was introduced, the former governor said, "Without political and constitutional progress, economic progress is not possible. Moreover, though the country's financial sector has continued to grow, the manpower of the central bank has not increased."
He also proposed a separate pay scale for central bank officials.
Farashuddin said, "The central bank governor needs to be converted into a constitutional post. Also, a law should be passed specifying the term of the governor for 5-6 years and not more than one term.
"Debt collectors, money launderers and tax evaders are all tied together."
At the event, Wahiduddin Mahmud, chairman of the Economic Research Group (ERG), said, "Since a certain business community gets political advantage, the real industrialists are being deprived.
Infrastructural development provides good facilities in the initial stage of development. For example, if village roads are improved, education and medical services also improve
"We have to eliminate politicisation in some very important areas and increase the priority of merit. Certain positions such as central bank governors should be brought out of politics so that they can make independent decisions."
He said, "The book launched today mentions that 80% of the upper class do not pay tax. In our country, the number of ultra elites is increasing at the highest rate. Now, we need to widen the tax net without raising tax rates."
Citing a study, the economist said, the development of human resources is also important along with the development of infrastructure.
"Infrastructural development provides good facilities in the initial stage of development. For example, if village roads are improved, education and medical services also improve.
"However, in the next step, there is no country in the world that has been able to develop without the development of human resources," Wahiduddin added.
Fahmida Khatun, executive director of CPD said, "Many people say that we should not implement the advice of foreign organisations. But it is also true that in many cases their advice is useful for our own development."
The central bank did not take the measures that were needed to reduce inflation
She also noted that " debt pressure is increasing, reserves are decreasing, but it didn't happen overnight."
Pointing out that there are several reasons behind the current condition of the banking sector, she said, "Due to political influence in the banking sector, institutional weakness has increased. In addition to the lack of good governance in banks, the independence of the central bank has been taken away."
The economist also commented that the delay in the collection of defaulted loans is due to legal weakness.
Fahmida said, "Good governance of the banking sector has been weakened due to insufficient information and lack of credibility. Also, there is no consistency in the policy of the central bank."
"The central bank did not take the measures that were needed to reduce inflation. Various factors are influencing this situation. The central bank has talked about out-of-the-box thinking, which has not worked." she added.
Dr Mashiur Rahman, economic affairs advisor to the prime minister was the chief guest of this event.
Prof Dr Wahiduddin Mahmud, chairman of Economic Research Group (ERG) and Prof Dr Shams Rahman, vice-chancellor, East-West University were the special guests. Dr Binayak Sen, director general of BIDS moderated the event.
Prof Dr MM Akash, faculty of BIDS Graduate School of Economics (BGSE), Dr Kazi Iqbal, research director of BIDS, Prof Dr M A Sattar Mandal, professorial fellow of BIDS, Dr Zaidi Sattar, chairman and chief executive, Policy Research Institute of Bangladesh, Dr Fahmida Khatun, executive director of Center for Policy Dialogue (CPD) and Dr AK Enamul Haque, dean, Faculty of Business and Economics of East West University, were among the discussants at the event.
