Is economy heading for a Greek tragedy?

Ken Mayhew is a labour economist who has spent most of his career in Oxford University in the United Kingdom where he is Emeritus Professor of Education and Economic Performance and a former Fellow and Tutor in Economics at Pembroke College.

Ken Mayhew asserted in some of his lectures and articles that improving management skills and upgrading innovative expertise are essential to sustain economic growth. In our country, there is a lack of professional and innovative human resource. As a result, most of the industries and corporate organizations including banks are run in a conventional way.

Innovative and sophisticated ideas and methods are required to carry out banking and financial activities in a smooth and foolproof way.Banks and financial institutions are the backbone of a country's economy. The governments of all countries take special care of their banks to sustain their economic foothold.

The banking and financial sectors of Bangladesh have been going through ceaseless corruption and irregularities for last three years. High Court has recently remarked that Bangladesh Bank is saving the corrupt clients while persecuting the innocent ones. This observation by High Court shows that Bangladesh Bank has totally failed to take effective measures against powerful loan defaulters.

The amount of defaulted loans has shot through the roof. There is at present nearly 1 lakh 44 thousand crore taka defaulted loans in the country including written off debts. Soaring defaulted loans have put most of the state-owned and private banks in liquidity crisis and capital deficit. Despite financial rampage and banking mishaps, Bangladesh Bank wanted to reward loan defaulters with 2% down payment facility to repay their loans. However, High Court has meanwhile placed a stay order on it.

The Asian Age published a report titled "Defaulted loans: Experts for disclosing top borrowers' details" on 6 March 2019. Prominent citizens have also called upon the regulatory authorities to expose the names, particulars, facts and figures associated with the top loan borrowers to measure the true extent of defaulted loans and to identify the mega defaulters. Allegations have come up that some influential bank owners are dictating the regulatory authorities which is why the top regulators are not being able to implement strong actions against financial fraudsters and loan racketeers.

Unscrupulous clients use fake mortgages and provide false information while taking big sums of loans from different banks. In many cases banks have disbursed loans without properly evaluating the documents and background of loan applicants. As a result most of these loans have become defaulted at the end of the day. Economists and financial experts have frequently said that national economy may face irreparable damages if the banking turf cannot be streamlined without delay.

Besides loan scams and sky-high financial anarchy, Bangladesh is also suffering from the highest ever trade deficit since the country's birth. Trade deficit has in the meantime exceeded BDT 113.70 billion. Import costs have by far crossed export earnings. Excessive import bills are responsible for the burgeoning trade deficit which has put the country's economy under a lot of stress.

Trade deficit has been further intensified by continuous money laundering. International Monetary Fund (IMF), World Bank, Global Financial Integrity and some other domestic and international agencies have meanwhile illustrated the mammoth amounts of money which have been so far transferred abroad from Bangladesh by money launderers. Reportedly almost 6 lakh crore taka has been laundered to foreign countries from Bangladesh during last ten years. Money launderers often resort to over-invoicing and under-invoicing to transfer money overseas through unauthorized channels.

Bangladesh's figures referring to trade deficit, defaulted loans, money laundering have much similarity with the financial turmoil that demolished the economy of Greece. The Greek economy faced deadly crisis during the global recession of 2008 as a result of uncontrolled financial disorder, banking disarray, fall of share prices, inflation and some other exasperating economic predicaments.

As Greece failed to rescue itself from steep economic downfall, the country went bankrupt and it had to be afterwards bailed out by European Union and IMF. The same sort of economic disaster happened to Zimbabwe as a result of banking rackets and unbarred financial vices.

Now questions come up inevitably whether Bangladesh's economy is heading for a Greek tragedy. Finance Ministry and Bangladesh Bank have been so far unable to constitute good governance and accountability in the banking arena. Allegedly Bangladesh Bank has turned into a rubber stamp organization under Finance Ministry which is why the central bank cannot exercise its authority over the financial offenders.

There is a lack of coordination between the financial regulators of Bangladesh. Last year gold vanished from Bangladesh Bank's vault for which Bangladesh Bank and National Board of Revenue (NBR) blamed one another. NBR Chairman is a member of Bangladesh Bank's board of directors but still the central bank could not sort it out before the incident got unfolded by newspapers.

Bangladesh has meanwhile surpassed the economy of Pakistan. Pakistan was ahead of Bangladesh in economic terms a few years back but now Bangladesh has exceeded Pakistan because of Pakistan's failure to resist corruption and anomalies in its financial sector. Pakistan has also fallen a victim to the debt trap diplomacy of China. Chinese consortium has caused staggering losses to Karachi Stock Exchange.

Projects like the China-Pakistan Economic Corridor (CPEC) and One Belt One Road (OBOR) have faced insurmountable impediments. On top of Pakistan, Chinese loans have shattered the economy of some other countries like Sri Lanka, Kenya, Sudan and Nigeria. Sri Lanka's Hambantota port has come under the control of China following Sri Lanka's failure to abide by the austere terms and conditions of Chinese loans.

Bangladesh should take lessons from the ordeal of Greece, Zimbabwe, Pakistan and Sri Lanka to avoid economic collapse.  Civil society members have in the meantime commented that the authorities of Bangladesh reward loan defaulters with exclusive privileges while poverty-stricken farmers are facing deprivations when it comes to fair price for the agricultural products they cultivate. I wrote about the hardship of farmers in another article in The Asian Age a few days ago. The government has meanwhile decided to impose 55% duty on rice import to enable farmers to get the appropriate price for the rice they produce.

Bangladesh has attained remarkable development during last several years under the firm leadership of Prime Minister Sheikh Hasina. We have meanwhile graduated from the least developed countries (LDC). Per capita income of Bangladeshi people has increased too. Digital technologies have reached throughout the country. Nevertheless, all these achievements can be overshadowed if the government does not succeed to rectify banks and financial institutions with immediate effect.

The writer is a diplomat, entrepreneur, author, Chairman of Editorial Board of The Asian Age and a CIP.