Sustained policy consistency is crucial for financial sector reforms in the coming 1-3 years, according to PRI.
In a recent gathering organised by the Policy Research Institute (PRI)'s Centre for Macroeconomic Analysis (CMEA), in collaboration with the Australian Government's Department of Foreign Affairs and Trade (DFAT), the need for restoring good governance in Bangladesh's financial sector was a central topic. The Monthly Macroeconomic Insights (MMI) session, held on 24 July, was chaired by PRI Chairman Dr Zaidi Sattar, with Dr Abdul Moyeen Khan, a former minister, serving as the chief guest.
The session concluded with an open-floor discussion on inflation, monetary policy, and the digitalisation of the revenue system. Dr Moyeen raised concerns about the injection of printed money to support weak banks, questioning Bangladesh Bank's efforts to prevent the taka from appreciating against the dollar. He also criticised Bangladesh's export performance, attributing it to ineffective tariff negotiations.
Dr Ashikur Rahman, the principal economist at the Policy Research Institute (PRI), emphasised that restoring good governance in Bangladesh's financial sector requires continuity and political commitment over the next one to three years. He highlighted revenue generation as one of Bangladesh's key structural challenges, pointing to a slowdown in private credit growth, reduced imports of capital machinery, and weaker investment, which now accounts for about 29% of the GDP, contributing to slower GDP growth.
Ongoing measures to restore good governance in Bangladesh's financial sector include a comprehensive three-year reform plan supported by the IMF, World Bank, and ADB. This plan focuses on new legislation, institutional reforms, and strengthened oversight by the central bank (Bangladesh Bank). Key laws introduced include a new Bankruptcy Act, Money Loan Court Act, Distressed Asset Management Act, Bank Resolution Ordinance, and Deposit Protection Ordinance. These aim to enable orderly bank restructuring, better management of non-performing loans, and protection of depositors while improving regulatory capacity to prevent future crises.
However, Dr Moyeen noted that without a clear separation between policymaking and implementation within the National Board of Revenue (NBR), meaningful progress will remain out of reach. He also highlighted the need for a competitive trade deal with the US to maintain global competitiveness.
Dr Muhammad Abdul Mazid, former NBR chairman, echoed concerns about Bangladesh's limited fiscal space and stressed the need for reforms in tax policy, debt management, and GDP calculation. He also emphasised that building trust within governments is crucial for achieving long-term stability.
Clinton Pobke, Australian Deputy Head of Mission to Bangladesh, noted that the MMI event serves as a bridge to understanding complex economic issues and engaging with them effectively. He highlighted that Bangladesh's reliance on exporting labor-intensive products such as RMG and footwear is no longer sufficient. Dr Zaidi Sattar agreed, stating that Bangladesh's economy remains investment-driven rather than consumption-led.
In conclusion, the restoration of good governance in Bangladesh’s financial sector is being pursued through a coordinated mix of legislative, regulatory, and institutional reforms, with the Bangladesh Bank poised to become a more proactive regulator. The success of these measures hinges heavily on sustained political will and commitment to uphold reforms beyond short-term governments, ensuring a credible and stable financial system going forward. Building trust among political actors and ensuring policy continuity are seen as essential to restoring confidence and stability in the sector.
Business leaders discussed the importance of improving good governance in Bangladesh's financial sector during the Monthly Macroeconomic Insights (MMI) session, highlighting the need for continued political commitment over the next few years. Dr Ashikur Rahman, the principal economist at the Policy Research Institute (PRI), stated that ongoing measures, such as the comprehensive three-year reform plan supported by the IMF, World Bank, and ADB, are crucial to restoring credibility and stability in the sector.
Financial and business experts pointed out that effective revenue generation is one of Bangladesh's key structural challenges, and improving the digitalisation of the revenue system is vital for boosting private credit growth and investment. Dr Moyeen, a former minister, emphasised that a competitive trade deal with the US could help maintain global competitiveness and ensure private sector growth.
