Fiscal, monetary reforms not possible even after elections: Ahsan H Mansur 

Major reforms in the government's fiscal, monetary policy and financial sector will not be assured even after the national elections, as the beneficiaries of mismanagement in these areas will remain powerful, said Ahsan H Mansur, executive director of the Policy Research Institute (PRI).

He said that the government is not clarifying what initiatives will be taken to ensure reforms agreed with the International Monetary Fund (IMF) after the elections. And it is not yet possible to say whether the government will have the power to ensure the reforms.

He made the remark while presenting a keynote at a press conference titled "IMF and Bangladesh" arranged Tuesday at the conference room of the PRI.

The PRI arranged the event to discuss the progress of an ongoing loan programme worth $4.7 billion in Bangladesh.

Ahsan Mansur said at the event that Bangladesh supposed to get disbursement of the second tranche of the loan worth $681 million in mid-December despite the government failed to reach the majority of targets set by the programme.

Ahsan Mansur said at the event that the economy is now on the verge of collapse due to degradation in various indicators including GDP growth, inflation, exchange rate, reserve of foreign currency and foreign debt situation.

He said that the lower revenue collection over the years hampered allocations to education and health sectors, implementation of projects and creating pressure on repayment of foreign debt. Despite efforts to recover from this crisis, the situation is not improving.

He expressed fear that the economy may be further hindered due to non-economic factors like foreign power intervention ahead of the election, labour issues and human issues.

He said that foreign involvement was not so much, but now there is. This year there will be no elections like the other two. There is also uncertainty about the elections. It is not possible to say that the government, people and country will remain in peace even after the election.

He said that, there will arise some challenges for the economy and major reforms must be done to face the challenges. He also said that it will be difficult to ensure any major reform and initiatives from the high-level political leaders are required for it.

He said that the beneficiary people from the mismanagement in the financial sector always remain powerful.

Most of the officials in the revenue system remain the same even in the change of political power and the change of NBR Chairman. They don't want any reforms or automation. They only want to maintain the status quo. 

Against this backdrop, he said, "The next government would have a difficult time tackling fiscal issues such as those related to revenue collection, government expenditure, monetary and exchange rate policies."

Mansur also said there was no obstacle to releasing the $681 million of the second instalment of the IMF's loan programme next December.

The situation, however, may change if a "powerful country" intervenes, he added.

Mansur also highlighted the economic pressures due to high inflation, revenue collection shortfall, dwindling reserves and exchange rate hikes, saying IMF-prescribed reforms would ensure macroeconomic stability and inclusive growth. 

He, however, said, "These reforms would not be possible before elections, so inflation would hover around 10%."

Adding that there was also no opportunity to bring any major reforms to the currency exchange rate at this time, the economist said it was hard to predict where the exchange rate would land. 

He said, "The dollar rate set by the central bank was not being followed while the banking regulator is not acknowledging the existing exchange rate in the market." 

He said the dollar exchange is taking place at the unofficial rate in the official interbank market. The unofficial rate is close to the rate in the kerb market.

Calling such management of the exchange rate unexpected, the economist said it was causing a lot of distortion in the market.

Mansur instead suggested that the exchange rate be left to market forces.

The PRI executive director also rubbished the statistics being released by the Bangladesh Bank, saying all of those were fake. 

"They are being forced to create fake statistics," he said.

Besides political instability and economic uncertainty, Mansur also said that the new government would have to face other international challenges.

"This is the first time that external forces are extensively discussing the election of Bangladesh. At this time, the labour issue has gained a lot of significance.

Speaking on the occasion, PRI's Research Director Dr MA Razzaque said this was the first time that political instability and economic uncertainty were both seen ahead of the elections. 

He warned that prolonged political unrest would only delay macroeconomic stability.

The IMF approved a loan of $4.7 billion for Bangladesh in January this year and released a $476 million in the first tranche of the loan in February.

The second instalment of the loan is expected to be released soon if the country fulfils the international lender's reform conditions.

Rahul Anand, division chief in the IMF's Asia and Pacific Department, recently welcomed the progress of reform implementation and the authorities' continued commitment to undertake decisive policy actions, amid a challenging environment.

"The authorities have made substantial progress on structural reforms under the IMF-supported programme, but challenges remain. Continued global financial tightening, coupled with existing vulnerabilities, is making macroeconomic management challenging, putting pressures on taka and foreign exchange reserves," he said in late October.

Meanwhile, the Bangladesh Bank has said it is optimistic that the IMF will approve the $681 million second tranche of its $4.7 billion loan during its board meeting on 11 December.