Chasing wild goose of siphoned money

Industrial stagnation and shrinking private investment have resulted in 1.4 million people's loss of jobs, who are now out on the streets, said former FBCCI president A.K. Azad, also, Managing Director of the Ha-Meem Group, while speaking at a discussion event styled, "Bangladesh Economic Conference 2025". As the proverbial wearer knows where the shoe pinches, so do the leading business people know what ails the industry. The economy, or the industrial sector of the country, for that matter, is now unable to create any new job. But this is an ominous sign for the economy, when about 3.0 million people are entering the job market annually. Every year, that number goes up. The urgency before the government is  to clear the main obstacles to the growth of the industries, because that is the only  answer to the issue of the ever-rising number of the unemployed in the country. Given the experience of the July uprising of 2024, the government should be on the alert to the disruptive potential of the unemployed disgruntled youth of the country.

In this context, the barriers to the industry's growth are   legion. But among the many issues coming in the way of the industry's expansion is costly bank credit as well as liquidity crises in the banks. As the banks were plundered during the ousted authoritarian regime in the name of rescheduling loans that were never recovered as well as direct looting by directors of private banks, the Non-Performing Loans (NPLs) piled up at an unprecedented rate. In this connection, the Bangladesh Bank (BB) governor, Dr Ahsan H. Mansur, has recently said  more than one third of the entire outstanding loans of the country's banking sector constitutes NPLs. According to the Bangladesh Bank data, in absolute terms, out of the total outstanding loans amounting to Tk.18.3 trillion till the end of September last, Tk6.44 trillion became classified, or NPL. That, in other words means, 35.73 per cent of all loans extended by banks, is NPL. This is the highest percentage of NPLs as compared to the rest of the world, not to speak of South Asia. Even in Sri Lanka, the economy of which was declared bankrupt three years ago, has now its ratio of NPL at 12.6 per cent, far lower than Bangladesh's. Even Sri Lanka's loan performance is on the higher side compared to those of other South Asian countries with India's at 2.3 per cent and Pakistan's at 7.4 per cent. Notably, according to the Asian Development Bank (ADB), as of the end of December 2024, the average NPLs in Asian banks was 1.6 per cent.  To put this into perspective, South Asia has the highest record of NPLs compared to that of the rest of Asia. But  Bangladesh beats them all with its close to 36 per cent NPLs, the world's highest. It does also beat the country's own record in the last 25 years.

Evidently, the banks are weighed down with these NPLs severely compromising their ability to extend required credits to the industries. Which is why, credit flow in the economy is stifled and the interest rate is high to the chagrin of the credit-hungry industrial sector.

Ironically, along with law and order, the interim government's priority was to retrieve the money laundered through foreign banks or offshore companies.  The effort, so far, has not seen much success for the simple reason that it is hard to track the laundered money as it also involves legal complications. Because, to retrieve the money, one has to conform to the law of the country where the stolen money has been deposited in bank accounts or converted into other assets. The government has learnt the hard way how strenuous and time-consuming is the task of bringing back the money siphoned off from the economy including banks and laundered abroad. Now that the interim government's time in office is nearly over with the next general election around the corner, the central bank governor finally admits that it would take five to 10 years to get around the crisis of NPLs. So, the question that would naturally arise is: why had the government not concentrated more on recovering NPLs than chasing the wild goose of laundered money concealed in offshore accounts?  If truth be told, the government, or the Bangladesh Bank, to be specific, has rather treated the big bank defaulters with kid gloves. On the contrary, it was necessary to be harsh with the influential bank defaulters.

The government could well confiscate the properties of the wilful defaulters and recover as much of the defaulted loans as possible. Unless the banks, which play the role of a financial intermediary in the economy, are on a stronger footing, the industries cannot flourish. But industrial growth is deeply interlinked with the overall macro-economy, of which, inflation, like unemployment, is a critical factor. Most importantly, the stubborn inflation, though it slightly decreased to 8.17 per cent in October from 8.36 per cent in September 2025, is yet to be brought under control with the usual  contractionary monetary policy. Unsurprisingly, price volatility in the kitchen market sometimes flies in the face of official consumer price index and the official rate of food inflation, which was 7.08 per cent last month. The central bank's effort at taming the inflation should also go hand in hand with restoring stability in the banking sector. With a large chunk of the bank depositors' money in the hands of the so-called called 'big bank defaulters', stability in the financial sector is inconceivable.

In this connection, the interim government should remember that it is not a caretaker administration, the job of which is only to hold an election and transfer power to the next elected government. Since it took office with a huge popular mandate in the wake of a mass upsurge, it cannot be exonerated from its obligation of getting some vital aspects of the economy such as the banking sector back on track. As it is with any regular government, the current interim government will also have to answer for its performance. It must finish some of the tasks that it had undertaken to start with.

So, what the next elected government would do is its business.  

sfalim.ds@gmail.com