Think of the poor when adjusting prices

The 2012 Extended Credit Facility (ECF) programme mainly focused on reforming the Value Added Tax (VAT) Act, capital market demutualisation and the Bank Company Act.

The VAT Act, although enacted in 2012, had its implementation target year set in 2017. Then, it was postponed for two years. The implementation of the Act began in 2019 but the full implementation is yet to happen due to various complications.

Meanwhile, the law has been changed so many times that it now seems the old law was rather pretty good.

Initiatives for the demutualisation of the capital market did not yield much benefit. Still the capital market manages to generate only a small part of the total investment demand. As the market capitalisation size is not increasing, the number of new IPOs is also not increasing that much every year.

Plans to widen the capital market did not materialise either. If you even look at the number of companies, there is hardly any noticeable growth.

Unfortunately, those 2012 reforms did not manifest.

It's not necessary that we will only seek IMF support when there is a crisis. Implementation plans of good reforms can also avail fund support from the IMF.

The banking sector is increasingly taking on more bad loan burden, and at the same time, it continues to relax repayment facilities. All the while scams and corruptions are there – some of those irregularities surface every now and then.

Once again, the Bank Company Act is going through an amendment process.

The VAT Act aimed to make processes easy and shut the loopholes so that VAT can be the largest source of our revenue collection, which remains poor – hovering around 8-9%.

Maintaining the lending rate cap renders the interest rate targeting pointless.

Currently, only the energy subsidy is being reduced as part of subsidy rationalisation. But, when adjusting the price, social protection for low-earners and the poor should be expanded as well to alleviate the added burden on them.

For reforms in expenditure management, the biggest issue is development spending. The key area here is to increase the efficiency of public investment programmes, where its business as usual – numerous projects, small allocations. Besides, it appears that time and cost overrun has become a norm. Visible changes in this area are yet to come.

Zahid Hussain, former lead economist, World Bank Dhaka office