Tk 922.61 billion embezzled from banking sector in 15 years: CPD

Some Tk 922.61 billion has been misappropriated from several banks over the last 15 years through irregularities and misuse of power and may have been laundered abroad, the Centre for Policy Dialogue (CPD) said on Saturday.

The CPD also said Bangladesh’s current economic state is like “crony capitalism” or like a “two-economy concept” practiced by the Pakistan government before Bangladesh’s independence in 1971.

“The banking sector is in the grip of crony capitalism. Crony capitalists have used banks as vehicles for reaching their goal of financial oligarchy,” CPD Executive Director Dr Fahmida Khatun told a media briefing in Dhaka.

“Although we fought for returning to a “one-economy concept” from the “two-economy” ones, practiced by the then-ruling Pakistan government before our independence, the country has now almost fallen back into such practices due to crone capitalism,” CPD’s Distinguished Fellow Professor Mustafizur Rahman said.

They said that the country’s economy is facing this kind of crony capitalism as state organs and institutions have been subdued with power concentrated in the hands of some influential persons and groups.

“Crony capitalism” refers to an economic system characterised by close, mutually beneficial relationships between business leaders and government officials.

The “two-economy” concept implies that the ruling West Pakistan government extracted resources from East Pakistan (Now Bangladesh) to benefit West Pakistan, severely depriving the people of the then eastern region. 
 
The Tk 922.61 billion funds have been siphoned off from the banking system, as reflected in 24 major media reports on financial sector scams, the CPD said at its in its “State of the Bangladesh Economy in FY2023-24” report. 

This amount is nearly 12.1 per cent of the current national budget and 1.8 per cent of GDP, Dr Fahmida Khatun said, while presenting the state of the economy report, prepared by the CPD, at its office in Dhanmondi, adding that this fund can easily fulfil budget deficit. 

“Over the last several years, the banking sector has encountered several irregularities perpetrated by numerous business conglomerates and individuals, resulting in the misappropriation of a substantial sum of money from several banks,” the CPD said.

The recovery of the misappropriated funds remains uncertain with the possibility of illicit overseas transfers, it added. 

The report highlighted that while big and influential borrowers have received undue privileges of provisioning, small borrowers face legal consequences, including imprisonment.

Professor Mustafizur Rahman said the country is almost reverting to a two-economy concept, as income distribution in the country is not taking place equally, aggravating the wealth gap.

“Look at the BBS’s HIES survey. In 2010, the survey found that the top 5.0 per cent rich people held wealth 30 times higher than that of the bottom 5.0 per cent. However, the latest 2022 HIES survey shows that the top 5.0 per cent rich people now hold 80 times higher than the bottom 5.0 per cent,” he added.

“The indirect tax is the largest in proportion to other taxes in Bangladesh, which are mostly paid by the poor and other people equally. But direct tax is lower than indirect tax, meaning that the rich are not paying adequate tax. The state organs are not taking proper action in this regard. It is affecting the balanced distribution of wealth among the poor,” he said.

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