The Metropolitan Chamber of Commerce and Industry has called upon the government to take appropriate measures to check capital flights from the country in order to boost investment and economic growth.
The chamber made the call in its review on the country’s economic situation for the January-March quarter of the fiscal year of 2016-17 that was published on Thursday.
The MCCI said that in order to become a middle-income country within 2021 the government should handle a number of issues including capital flight carefully.
A recently published report of Global Financial Integrity said that illicit fund outflows cost Bangladesh as much as $8.97 billion in 2014, the latest year for which comprehensive data are available.
It also said that Bangladesh lost as much as $75.15 billion between 2005 and 2014 due to trade misinvoicing and other unrecorded outflows.
‘It is a great riddle that when investment in the country in proportion to GDP (gross domestic product) has been falling for several years, some economists are complaining that huge amounts of capital leave the country every year,’ the MCCI review said.
The MCCI in its report also focused on the scam-hit banking sector and suggested strong intervention from government and monetary authorities to get the sector out of the situation.
‘Most of the public sector banks are now suffering huge capital shortfalls due to rising defaulted loans,’ it said.
Therefore, a thorough reform of the banking sector should be initiated in order to improve the capital base of public sector banks, mitigating the capital shortfalls caused by mounting defaulted loans, the statement said.
The defaulted loans in the banking sector increased to Tk 73,409.06 crore as of March 31, 2017 from Tk 62,172 crore as of December 31, 2016, according to a recent Bangladesh Bank report.
The MCCI in its report also said although the services sectors were doing well, government intervention would be needed to mitigate some sector-specific problems in banking, insurance, transportation, tourism, real estate business, especially private sector health and education service in order to make these services less costly to the largest segment of the population.
Mentioning remittance inflows puzzling when a huge number of people have taken overseas jobs in recent years, the MCCI report said that the government and the BB should take appropriate steps to encourage expatriate workers to send remittances through official channels.
The suggestion of the Human Development Report 2016 that Bangladesh should set up a remittance bank for easy and transparent inflow of foreign wage earnings into the country is also worth looking into, said the MCCI.
Remittance inflow in the first nine months of the current fiscal year dropped by 16.86 per cent to $9.195 billion compared with that of $11.060 billion in the corresponding period of the previous fiscal year.
Remittance inflow has been on the decline as low oil prices, weak global economic growth and fiscal tightening in the Middle Eastern countries and the Russian Federation along with a rising trend of sending hard-earned money by non-resident Bangladeshis using informal channels continue to hurt the key source of foreign exchange, the MCCI report said.
Export earnings were 4.29 per cent short of target during the first nine month of the fiscal year due to a slow growth in apparel exports, it said.
Metropolitan chamber in its report, however, said that the overall economic situation in the country was positive as indicated by steady improvements in the major economic indicators.
The report observed that the country experienced stable growth, while inflation was under control, the exchange rate remained stable and foreign exchange reserves rose to a comfortable level.
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