Centre for Policy Dialogue on Sunday suggested the government to examine the issue of over capitalisation of development projects, mega infrastructure projects in particular, to save resources and ensure quality of expenditure.
Releasing its report on the State of the Bangladesh Economy in the 2018 financial year (third reading) at a briefing at BRAC Centre in Dhaka, the think-tank also said that the main disease or crisis of the country’s banking sector was lack of governance and prevailing political economy of perverse.
‘The construction cost of one kilometre road in the country is higher than that of the United States,’ CPD distinguished fellow Debapriya Bhattacharya said at the briefing.
It seems that same picture may be found after analysing the cost of another three-four mega projects, he said.
It is obvious that the cost of project implementation increased in the country because of time overrun as the cost needed to be adjusted in line with the inflation, he said.
Much higher cost is estimated through overcapitalising at the beginning of the projects, he said.
The government should examine whether it happens because of over capitalisation of development projects, he added.
CPD also suggested that the government should take a programme of zero tolerance of non-performing loans and modernise the legal framework, including the Money Loan Court Act 2003 and the Bankruptcy Act 1997, to deal with non-performing loans.
‘We are running after the symptoms of the disease of the banking sector like liquidity crisis without addressing the main disease which is lack of governance or political economy of perverse,’ Debapriya said.
The Bangladesh Bank and finance ministry are collaborating with the perverted people to protect their interests, he said.
Nothing would come back in right track unless political economy works properly, he added.
CPD recommended that the government should form a commission on banking sector to find out the reasons behind the weakness of the sector and recommend ways to overcome the crisis of the banking sector.
CPD distinguished fellow Mustafizur Rahman said that the fiscal framework continued to be weak with mismatch between budgetary targets, revenue mobilisation and implementation of the annual development programme in particular, and their actual accomplishments.
External sector has also come under pressure due to high import payment, he said.
In this context, the government should focus on consolidation of macroeconomic stability reducing inequality and creating decent jobs, he said.
Though there will be less appetite for undertaking any reform in the election year, the government should go forward with the unfinished reform agendas, including setting up of a public expenditure review commission and agricultural costs and prices commission, he said.
CPD also recommended the government to adopt a restrained macroeconomic management with restrained banking sector, monetary policy, exchange rate, inflation and interest rate in the next national budget.
A comprehensive and realistic revenue collection plan and a demonstrated mechanism for implementation of fast-track projects should be devised in the next national budget, it said.
The implementation of the nine fast-track projects are not fast enough, it said, adding that only five projects were making visible progress.
CPD also recommended that the tax-free income ceiling should be raised to Tk 3 lakh in the next national budget and an impact analysis should be conducted before reducing corporate income tax rate.
CPD executive director Fahmida Khatun also spoke while research director Khondaker Golam Moazzem and research fellow Towfiqul Islam Khan were present at the programme.
Want stories like this in your inbox?
Sign up to exclusive daily email
More Stories from Banking