Financial sector woes to weigh on GDP growth
The troubled financial sector will pose a big challenge to the government's goal of achieving higher economic growth in future, speakers said yesterday.
“The performance of the financial sector is deteriorating and a reform is needed,” said Prof Shamsul Alam, a member of the General Economics Division of the planning commission.
He spoke while addressing the opening session of the “First SANEM Macroeconomics Workshop” at the Hotel Lake Breeze in Dhaka. The South Asian Network on Economic Modeling (SANEM) organised the event.
Alam said interest rate, which plays a key role in stimulating investment, was still not determined by the market.
He said capital account convertibility should be opened gradually to liberalise the economy.
“A liberalised economy is growth supportive. So, this is the time to allow investors to invest abroad,” he said, adding that import tax should be reduced to move towards a liberalised economy.
Prof Alam said rising inequality was another big challenge for the fast growing economy. “The government is concerned about inequality and planning to enhance social protection umbrella in order to reduce it.”
He emphasised increasing expenditure on the health sector and human resource development to cut poverty.
Atiur Rahman, a former governor of Bangladesh Bank, said the economy remained stable amid the global financial crisis riding on the developmental role of the central bank in the last one decade.
He said the central bank forced banks to finance agriculture and small and medium enterprises which brought macroeconomic stability.
Rahman said soon after becoming the governor of the central bank, he had created the opportunity for foreign loans to be taken at lower costs in order to put pressure on local banks to reduce lending rates.
“The policy worked well,” he said, adding that about $8 billion in foreign currency loan entered the market in the last six to seven years, pushing down the lending rate to single digit. He recommended that the government initiate a universal pension scheme to strengthen social protection. All lower income groups should be brought under the scheme to reduce poverty.
“A separate regulator can be formed to regulate the pension scheme. Or, any existing regulator like the Bangladesh Bank can be given the additional responsibility to manage the scheme.”
Iyanatul Islam, an adjunct professor of the Griffith Asia Institute of Griffith University, presented the keynote speech. Selim Raihan, executive director of the SANEM, also spoke.
