Sharp decline in remittance inflow poses a ‘major challenge’ for the country’s economy in the New Year amid chronic slow private investment, growing bad loans and capital flights.
Economists and experts said that the country’s economic progress in the past year was not bad as the export grew 6.9 per cent to $31.83 billion in the first 11 months of 2016 while tax collection by national board of revenue grew 17.35 per cent to Tk 35,264 crore in third quarter of the calendar year.
The country’s foreign exchange reserve stood at $32 billion in December from $22 in January in 2016 despite theft of $81 million from the Bangladesh Bank account in the New York Fed by the hacking suspects and laundering of the money in Philippines.
Falling remittance since July along with slow private investment and growing bad loans, however, outshone the positive economic indicators in 2016.
Bad loans in the country’s banking sector increased by 24.57 per cent to Tk 54,173.35 crore in the first nine months of 2016 from Tk 43,485.71 crore in December 2015.
Private sector credit growth decreased in September, October and November over 15 per cent as businesses showed less interest in expanding their business despite huge liquidity in the banking sector.
Former Bangladesh Bank governor Saleh Uddin Ahmed said that the country’s business sector was yet to get rid of a dull situation although there was no major political tension in 2016.
He said that bad loan would go up further to hurt the economy like an ‘epidemic’ as the central bank failed to take any effective action to check the high growth of the bad loans.
The country’s import payment registered over 17 per cent growth in November 2016 after many months just because of imports by the government for construction of the Padma Multipurpose Bridge and capital machinery to set up power plants.
Experts said that imports of industrial raw materials and intermediate goods did not increase much that could support the good growth in private investment.
Independent research organisation Unnayan Onneshan noted that stagnation in the ratio of private investment to gross domestic product and ever increasing rise of capital flight, coupled with regulatory unpredictability in economic management appeared to be the major challenge in the economy.
The think tank showed that private investment was 21.78 per cent of GDP in 2015-16 which was 22.07 in 2014-15.
Experts suspected that dishonest businesses were siphoning out money by over-invoicing in absence of proper monitoring by the authorities concerned.
According to a report of Global Financial Integrity in December 2015, capital flight from Bangladesh surged 33.78 per cent year-on-year to $9.66 billion in 2013 through trade misinvoicing and other channels.
Policy Research Institute executive director Ahsan H Mansur said that capital flight could not be checked only through monitoring.
The government should offer incentives so
that local investors feel encouraged to make more investment in the county, he said.
He said that it was proper time for the government to rethink about the private investment after Chinese president Xi Jinping offered $20 billion loan in addition to $13 billion trade deals during his visit to Dhaka in October 2016.
World Bank in its report on the country’s economic update released in October 2016 identified that progress on ease of doing business was slow while inadequate infrastructure, bureaucratic inertia, and corruption continued to hinder domestic as well as foreign investment.
It also identified that negative inflow of remittance would hurt the country’s economy in the newyear.
The remittance growth dropped by 9.1 per cent in the first nine months of the outgoing calendar year over the same period of 2015 with the sharpest fall by 15.65 per cent recorded in July-November 2016.
Former caretaker adviser Mirza Azizul Islam said that the falling remittance would hit the overall consumption and eventually the growth of the gross domestic product.
He pointed out that a large number of people depending on remittance would feel discouragedin spending additional money because of negative growth in remittance.
According to Bangladesh Bureau of Statistics, consumption contributed 75 per cent of the country’s gross domestic product of 7.2 per cent in 2015-16 financial year.
The negative growth in remittance despite a good number of overseas job employments in 2016 is attributed to the economic slowdown in the Middle East countries, main sources of the country’s 60 per cent remittance flow, and the increased ‘hundi’ operation.
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