Getting Bangladesh back on track: How to restore normalcy to the economy

Sketch: TBS

With former prime minister Sheikh Hasina having resigned and left the country on Monday, the responsibility of restoring stability in the country has been taken up by the army. Later in the day, Bangladesh's Chief of Armed Forces General Waker-Uz-Zaman informed the nation of forming an interim government to administer the affairs of the state.

Although the violence that claimed the lives of over 300 people in the past few weeks might come to an end, the interim government has an uphill battle to fight when it comes to the economy. 

The country's economic challenges have been ramping for much longer than the quota protests — some structural problems stretching as far back as the first tenure of the recently ousted Awami League government. 

TBS reached out to some experts and economists to analyse these challenges and the probable solutions the new government will have to consider in the coming months.

'Prepare a white paper on the state of the economy'

Dr Debapriya Bhattacharya, Distinguished Fellow, Centre for Policy Dialogue (CPD)

I would suggest that the interim government start off by preparing, very speedily and efficiently, a white paper on the state of the economy, so that we have a bit of transparency on the current state of affairs of the economy. 

Firstly, the white paper could focus on problems such as the economic challenges that were triggered by the recent movement in the last month or two. 

The second set of problems [they could focus on] include macroeconomic stability, the foreign exchange reserve, the power situation, the inflation rate, etc. that affected us in the recent past.

The third set of problems are the structural problems that we have carried forward in the last decade or so: the fault lines in the development approach we pursued, including revenue mobilisation, banking reforms, capital market reforms, how to improve private investment, etc. and also the backlog on the longstanding reform agendas. 

So, I see three sets of problems. Immediately to bring back economic normalcy, we need to first ensure that exports, remittances, employment, wages, etc. are in line at the moment and stabilise the market to the extent possible for the commodities, which are very much necessary for the lower-middle class or middle class. 

On the other hand, [we also need to address] the problems we saw in the recent past, partly because of the global situation, and partly because of our own mismanagement and then thirdly, [we need to address] the reform of the long outstanding issues. 

So, the white paper will bring some transparency and help the interim government to prioritise its actions. If the document is prepared in a professional and participatory way through discussions with all the stakeholder groups, then the government may draw up an action plan, depending on the timeframe within which it will be in power. If it remains for three months, then it is one thing, if it remains for a longer period, it is another thing. 

So, my advice is, prepare a white paper on the state of the economy so that all the confusion about the data and the information gap we have are cleared, and one can have an informed judgment regarding how to move forward. 

Dr Debapriya Bhattacharya spoke to TBS Feature Writer Promila Kanya over the phone. 

'Haemorrhaging has almost stopped, so we must now focus on the diseases' 

Zahid Hussain, former lead economist, World Bank Dhaka office

Where the economy goes from here depends on where we take it. We are not sure what the next government will look like and what their mandate will be. If they have a very limited mandate, where their only task will be facilitating a free and fair election to install a democratic government, in that case, they will not have much to do when it comes to the economy other than routine policy-making, because it is outside their mandate. 

But even within the purview of that routine work, they will have to focus on some aspect of the economy, because the wheels of the economy must keep turning. The haemorrhaging has almost stopped, so we must now focus on the diseases that have taken root inside the body. 
The past couple of weeks, we were almost in a double lockdown. You could neither go out, nor could you do anything from home. Even during the pandemic you could at least work from home. So, there was a real lockdown and a virtual one. The economy became totally dysfunctional due to the double lockdowns. Even in Gaza, the vegetable sellers bring out their produce. Other than that bare minimum, the economy came to a halt. 

So, what will 'bringing back normalcy' mean? 

The internet will not be weaponised against us, and most importantly, since the change was brought about by students, we have to ensure that they get the right environment to resume their studies. There are other agendas when it comes to the education sector, like getting the education system out of the clutches of dirty politics, but this will come a little later. 

The ports must resume operation. The disruptions need to be taken care of. The damaged infrastructures which are important for our economy, like the Metrorail, need to be restored. The factories must resume operation, the shops must reopen, and the economy must resume operating at full steam.

There was already a lot of pressure on the economy. The biggest one that impacts common people the most is inflation, the price of commodities, the price of food. The normalisation of the economy is essential to battle this inflation. The supply chains must start functioning properly. 
To ensure production stays on course, we must address the disruption in imports. There, the biggest issue lies in the foreign currency crisis. The reforms that have been announced to deal with the issue have so far not been implemented properly. If implemented properly, they can reduce the forex shortage.

To solve the issues with the financial sector, some measures were suggested, but have not been implemented. Good measures like the prompt corrective action framework must be implemented immediately. We cannot wait for the elected government. 
One of the biggest demands of the movement was reining in corruption. This is a difficult task. But the new government can start preparations. If an anti-corruption drive does start we should not forget to take lessons from history. The biggest corruption drive in Bangladesh's history back in 2007-08 failed due to the lack of homework. To file a case against them, you need legal preparation. So, eventually, the ACC could not do anything in the courts due their lack of preparation. 

The anti-corruption law also needs to be reformed because the Awami League government nerfed it. The ACC itself was declawed. The original anti-corruption law needs to be restored and the ACC needs to be restructured. The groundwork for an anti-corruption drive must start now, otherwise the students will be sorely disappointed. 

Fiscal reform must begin with the Annual Development Programme (ADP). We must decide what to do with the megaprojects remaining in the ADP. In his book 'India Is Broken: A People Betrayed, Independence to Today', Ashoka Mody refers to the strategy of building frivolous megaprojects as the temple strategy of development. 

These temples need to be identified and reevaluated. The feasibility studies need to be revisited as well, because there are a lot of questions regarding these studies. Then we must decide whether these projects will be redesigned to make them more sustainable or whether they will be completed as is. The megaprojects need a reevaluation. A commission can be formed to oversee this, who will not only review the development budget, but also the operation budget as well.

Zahid Hussain spoke to TBS Editorial Assistant Nasif Tanjim over the phone.

'We must immediately take strict measures to suppress anarchy'

Ahsan H Mansur, Executive Director, Policy Research Institute (PRI)

Bangladesh's economy is already facing significant problems. Our problems are twofold: macroeconomic and structural. 

Macroeconomic issues like inflation, exchange rates, foreign exchange reserves, and interest rates have worsened significantly over the past month. While our current policy stance might remain the same, there might be a need for further tightening. Perhaps, after four-five months, we can expect improvements on the reserves and inflation front.

However, the real challenge lies in the financial and revenue sectors. Regardless of which government comes to power, we must form an expert committee comprising international experts for the financial sector. This committee, in collaboration with the Bangladesh Bank, should assess the condition of each bank and implement necessary regulations. Crucial decisions like policy measures for individual banks and the overall banking sector, mergers, or liquidations of weak banks need to be taken. This is a massive undertaking that could take around six months.

We need to introduce major reforms in the revenue sector, including tax policies and administration. Three smaller committees should be formed for VAT, taxes, and customs duties. The task of these committees is to develop an automated, centrally administered system. Extensive work, such as developing databases, is necessary to control corruption. This is a difficult and challenging task that no government has been able to accomplish. If we succeed, it will be a significant achievement.

Moreover, we need to strengthen local government and provide them with financial independence. Local governments should be allocated funds based on population and area. Regardless of the government in power, the allocation should remain unchanged, and good governance should be ensured in utilising these funds. Simultaneously, primary health and primary education should be handed over to local governments. This is because local recruitment can ensure better service delivery. Additionally, local leadership should be developed.

We must immediately take strict measures to suppress anarchy. For instance, the Ganabhaban and Parliament are our national assets, not Hasina's property. Looting and burning of houses must stop. Regardless of whether we are in the majority or minority, we must identify ourselves as a tolerant nation. We should not be vengeful. I suggest that the military administration, along with the civil administration, should immediately focus on this aspect. If necessary, curfews can be imposed at night, and police and military can ensure security in vulnerable areas during the day. We must control anarchy to protect our national assets. 

Ahsan H Mansur spoke to TBS Staff Correspondent Tonmoy Modak over the phone. 

What needs to be done first is provide relief to people

Dr Fahmida Khatun, Executive Director, Centre for Policy Dialogue (CPD)

The economy has been in a shattered state for the last few years; particularly our macroeconomic stability in the last two years has been totally broken because all the major economic indicators are down. 

This is not something that happened all of a sudden; this is a culmination of wrong policies and also a lack of institutional reform and lack of good governance. This is why all the economic strengths gradually weakened. 

High inflation, low tax-GDP ratio, low export-import, low remittances, low foreign exchange reserve, and alongside them, the so-called growth that could not generate employment, which meant youth unemployment became particularly high. 

So, all the benefits derived from economic growth were not shared by the common people. During the last 15 years, a strong group of beneficiaries evolved, who were connected to political parties and powerful people. 

The corrupt politicians, bureaucrats and businessmen — these three groups swindled, or extracted from the economy. Due to the huge wastage and corruption caused by them, the cost of implementing all these big projects — Padma Bridge, Expressway etc. — were multiplied by several times.

On the other hand, the financial sector was totally ruined. The banking sector is grappling with high default loans and the banking policies were not made by the regulatory bodies; rather they were made by external forces.  

Overall, in the last 15-16 years, the economy came to this point because of a complete lack of good governance and institutional reform. 
Turning around this economy is the major challenge. Almost all the other countries have managed to reduce their high inflation rate, but not us, because the central bank governor could not decide on a good policy because he thought about the businessmen first — the ones getting the benefits. 

What needs to be done at this moment is to provide some relief to the people, create employment for them, generate income for them, fix all the corruption that was done over the years, and bring to justice all those who were responsible for it.

Dr Fahmida Khatun spoke to TBS Feature Writer Promila Kanya over the phone.

'Those in charge today must take actions to prevent anything that pushes the nation out of the frying pan and into the fire'

Iftekharuzzaman, Executive Director, Transparency International Bangladesh (TIB)

The culmination of the quota reform and anti-discrimination student movement in the fall of the Awami League regime is a testimony to the invincible power of the students and youth of Bangladesh. They have once again set a milestone in gold that will be a permanent reminder for generations about the key catalytic role of the youth in whatever Bangladesh has achieved over the years of history, which many of us —  especially power-holders — almost always tend to forget. 

Hats off to all the students who made the nation proud again by their determination and dedication for an absolutely genuine cause, through a peaceful and non-political movement. The price they paid is unprecedented in terms of hundreds of deaths and multi-dimensional violations of the fundamental rights of striking students, children, adolescents and common people. Those who lost lives should be recognised as martyrs for the cause of a glorious movement against discrimination and injustice. 

It marks a humiliating defeat for Awami League and Sheikh Hasina — an outcome of their blind overconfidence and intransigence based on a perceived invincibility of their power base, that was not only detached from the people, but also ruthlessly insensitive to public interest. It is about their dismal failure to understand the new generation's mind and aspirations and to realise that youth power cannot be suppressed by use of force, whatever type and levels of ruthlessness it may represent. 

The key question at this stage is, while it marks the defeat of an authoritarian regime, will it truly lead to a true victory of the students and the common people, in terms of the underlying cause they stood up for and rallied en masse for — anti-discrimination, equality and justice for all, irrespective of various markers of identity. 

The Army Chief has promised accountability of everyone responsible for all the injustices and violations during the movement, which is encouraging.  It remains to be seen if, for instance, the transition government will go for a nationally and internationally acceptable investigation by a fully independent commission at the initiative of the United Nations. 

It will be important to watch if, and to what extent, the relevant staff of the law enforcement agencies will be held to account for multi-level and multi-dimensional violations of human rights, in most cases by indiscriminate and disproportionate use of force, often by direct use of lethal weapons, which are illegal and unconstitutional. Will the security agencies be brought to book for their blatant abuse of power? In addition to those directly responsible for the violations, will those who inspired and ordered the violations face justice? 

What agenda will the interim government have in terms of overhauling the state institutions involved with rule of law and salvaging them of the perils of politicisation-led dysfunctionality and professional bankruptcy? 

What measures will the interim government take to prevent and stop the outbreak of a new round of mayhem of revengeful violence, particularly targeted against Hindu minorities across the country? These are not examples of what the student movement was about, nor were these what people at large rallied and supported it for.

Those who are in charge today must have the courage and strength for taking actions to prevent anything that pushes the nation out of the frying pan and into the fire.