Monetary policy left wanting  

Mahmudur Rahman       | Published: February 04, 2019 22:11:18 | Updated: February 05, 2019 22:20:21


The monetary policy for the second half of the fiscal year has been declared as cautionary without specifying who or what it cautions against. Policies that are unable to handle bad loans are as good as having no policies and it doesn't read well that in 2015 alone close to $ 5.0 billion have been illegally repatriated out of Bangladesh. One third or 37 per cent of the siphoning is being attributed to playing hockey with the invoicing system and both private and state-owned banks are guilty of being the conduits for such activities.

Fazle Kabir, the Bangladesh Bank Governor, has issued warnings of crackdowns but it is the head of the anti-corruption commission whose frank statement paints the true picture. In his words, what is he to do in a sea of corruption seeking, as he did, specifics on the corruption that is openly on display each day? It is part of governance parlance that the government and its institutions act when matters are brought to their attention but when it comes to the banking and financial institution sector, there are periodic reports on which such can happen. The anti-corruption commission can requisition such reports for their investigation though these are to be acted on by the Bangladesh Bank itself.

Too many instances are emerging of individuals having placed Fixed Deposits with non-banking financial institutions and banks only for those to renege on their capital. And since the state and the Bangladesh Bank have provided these institutions with the licence to operate it is obligatory that liability created is backed up by government guarantees. That was in essence what the former Finance Minister had signalled to when trying to provide for funds in the budget to meet the yawning gap in capital. Essentially that is wrong in that taxpayers should not have to finance pilferage. Accountability does come first and there's little about that happening. On the contrary, whatever media coverage has exposed such misdemeanours have either not been acted upon or directly and indirectly rubbished. The moneys under concern have vanished, probably siphoned out of the country under the efficient Hundi system. And for all the exhortations of the analysts to come down hard on Hundi, the system works in every country in the world without a workable solution. Internationally, money-laundering prevention has worked to an extent but the full flow of such laundering hasn't stopped even through official channels. Bangladesh's systems are nowhere near as sophisticated thereby increasing the demand for government securities and bonds. Contrary to the argument of higher government debt, it is better such debt increases with the protection it brings rather than create a situation of individuals being swindled. Far better is the government acting as the brokerage house by lending money to the non-banking financial institutions (NBFIs) and asserting a semblance of control. They have betrayed the trust of depositors and must be brought to book.

mahmudrahman@gmail.com

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