One and a Half Cheers for Governor Talukdar

In any country, the Secretary to the Ministry of Finance and the Governor of the central bank are two seniormost technocratic positions responsible for economic management. In most countries, the finance minister, and ultimately the Prime Minister (or the head of the government), are the ultimate decision-makers. The Secretary, however, is in charge of producing the policy options and explaining the tradeoffs upon which the Minister (and the PM) base their decisions. The central bank governor, meanwhile, is given clear tasks —keeping inflation low and stable, managing the external deficits, maintaining a healthy financial sector and so on—and considerable to autonomy to perform them.  

Abdur Rouf Talukdar has had the opportunity to hold both positions. A graduate of Dhaka University’s Institution of Business Administration and a veteran of the Finance Division —which is responsible for the budget and macroeconomic policy—of the Ministry of Finance, he was appointed as the Division’s Acting Secretary in 2018 and promoted to the Senior Secretary of the Ministry in 2021. Then, in July 2022, he assumed the role of the Governor of the Bangladesh Bank.

In his illustrious career, he was instrumental in modernizing public finance management. His appointment came at a time when Taka was reeling from severe depreciation pressure. He was expected to be a steady helmsman atop economic bureaucracy. The reality, of course, has turned out to be quite different. With foreign exchange reserves halved, the taka depreciating by over 40 per cent, and nearly double digits inflation (higher than others in the region), he has been given a ‘D grade’ by the New York-based Global Finance magazine recently.  

In a meeting with the Economic Reporters’ Forum on 6 November, the Governor spoke candidly about his time at the Bank. One must applaud his frankness —the first cheer. One also should commend, up to a point, the policies he will be pursuing. This is, however, only half a cheer because these are the things he should have been doing for the past year and a half. Perhaps as a career civil servant, he couldn’t have clearly spelt out why he didn’t do the right things all along —it’s not the place of the bureaucrat to publicly blame the Minister and the Prime Minister. Fair enough. As someone with a similar (albeit far less stellar) career as the Governor, this author understands.

However, yours truly is under no obligation to mince words. This piece quotes the Governor directly and spells out exactly whom you should blame for the economic mismanagement in Bangladesh —Prime Minister Sheikh Hasina. In doing so, it will become clear that as long as she remains in power, things will not improve. That is, the Governor’s forecasts that things will improve next year will likely be wrong. Unfortunately, that means no third cheer for him.

The Governor said:

৩৬ বছরের চাকরী জীবনে এমন অর্থনৈতিক সঙ্কট দেখিনি

I haven’t seen such an economic crisis in 36 years of working life

Let’s consider the shocks that have hit Bangladesh in the last 36 years: floods of 1987-88; the Iraqi invasion of Kuwait and aftermath, which resulted in over 100,000 Bangladeshis repatriated out of the Gulf in 1990; cyclone of 1991; political strife in 1995-96 when the Awami League and allies imposed 180 days of hartal; Asian Financial Crisis of 1997; flood of 1998; global commodity price shocks in the 2000s that saw oil and food prices reaching record highs in 2008; Global Financial Crisis and the Great Recession of 2008-09; and the COVID-19 Pandemic in 2020-21.

Yes, the War in Ukraine has affected the economy. But why should that War have resulted in a worse crisis than all these other shocks that hit the country in the last 36 years?

The Governor further said:

আগের অর্থবছরের ১২ জুলাই গভর্নর পদ গ্রহণ করার পর, আমি উত্তরাধিকার সূত্রে ১৮ বিলিয়ন ডলারের কারেন্ট অ্যাকাউন্ট ঘাটতি পেয়েছি, যা জিডিপির শতাংম। উল্লেখযোগ্যভাবে, আমরা সফলভাবে এই ঘাটতিকে ইতিবাচক ভারসাম্যে পরিণত করেছে

After becoming the Governor on 12 July of the last financial year, I inherited a current account deficit of $18b, which 4 percent of GDP. Notably, we have successfully turned this deficit into a surplus.

This is true. The current account is indeed in a surplus. But he doesn’t say that this was achieved through draconian restrictions on imports, which has wrecked havoc on the markets of many individual commodities, creating supply chain bottlenecks, and ultimately raising prices.

He admitted that:

পণ্যমূল্য বাড়ানোর নেপথ্যে সিন্ডিকেট হচ্ছে। (There are syndicates behind rising prices.)

Well, syndicates thrive when prices cannot adjust in the market. Instead of import restrictions, had the interest rates were allowed to rise and the taka was allowed to depreciate in an orderly manner, perhaps things would have been better. The Governor doesn’t quite say this explicitly, but that is the corollary of his admission.  

Returning to the external sector, the Governor continued:

আর্থিক অ্যাকাউন্টটি আগের অর্থবছরে ১৫ বিলিয়ন ডলারের উদ্বৃত্ত থেকে চলতি অর্থবছরে বিলিয়ন ঘাটতিতে পড়েছে। অর্থাৎ ১৭ বিলিয়ন ডলারের একটি ব্যবধান। সাম্প্রতিক ইতিহাসে এমন ব্যাপক মাত্রার পরিবর্তন আর দেখা যায়নি

The financial account turned from a surplus of $15b from last financial year to a deficit of $2b in the current financial year.

হুন্ডির চেয়ে ওভারইনভয়েসিংয়ের মাধ্যমে কমপক্ষে ১০ গুণ বেশি অর্থ পাচার করা হয়েছে।

About ten times as much money is laundered out through over-invoicing compared with hundi.

দুবাইয়ে ১৩ হাজার বাংলাদেশি মালিকানাধীন কোম্পানি রয়েছে। প্রতিটি কোম্পানি প্রতিষ্ঠা করতে কমপক্ষে কোটি টাকা খরচ হয়েছে। এই টাকা বাংলাদেশ থেকে পাচার হয়েছে দুবাইতে। পর্তুগালে গত দুই বছরে আড়াই হাজার বাংলাদেশি নাগরিকত্ব পেয়েছেন। তাদের প্রত্যেককে কমপক্ষে লাখ ইউরো বিনিয়োগ করতে হয়েছিল। এই টাকাও দেশের বাইরে পাচার হয়েছে

There are 13,000 Bangladeshi owned companies in Dubai. It costs at least 5 crore taka to establish each company. This money was laundered from Bangladesh to Dubai. Portugal has given citizen to 2,500 Bangladeshis in the past couple of years. Each of them needed to investment at least half a million euros. This too was money laundered out of the country.

আগে প্রতিমাসে প্রায় দেড় বিলিয়ন ডলার ইনভয়েসিংয়ের মাধ্যমে পাচার হতো

In the past, about $1.5b were laundered out through invoicing.

It’s great that the Governor admitted that under his predecessors, $1.5b were laundered out every year. And it’s great he put a stop to this. Kudos.

The Governor of course didn’t tell us who exactly were these corrupt businessmen who laundered this obscene amount out every month! Nor did he say who exactly are the businessmen who keep rescheduling their loans:

আমি গভর্নর হওয়ার পর, আমি ঋণ পুনর্নির্ধারণের একটি সীমা আরোপ করেছিলাম। আগে, কোনো ডাউন পেমেন্ট ছাড়াই/ বার ঋণ পুনঃনির্ধারণ করা যেত। আমি এটি চারবারে সীমিত করেছি। কোনো ঋণ চারবারের বেশি পুনঃতফসিল করা যাবে না। এর পর তা ননপারফর্মিং লোনে পরিণত হবে এবং ব্যাংক মামলা করবে। সে কারণেই খেলাপি ঋণ বাড়ছে। ব্যাপারে আমরা খুবই কঠোর।

After becoming the Governor, I put a limit on loan refinancing. Previously, loans could be refinanced 5/6 times without any downpayment. I have limited it to four. No loan can rescheduled more than four times. After that it will turn into non-performing loan and the bank will sue. That’s why loan defaults are rising. We are very tough on this.

Well, one could list many businessmen who has been rescheduling and refinancing their loans, and the bankers who have allowed them to. But it’s important to understand who bear the ultimate responsibility here: AFM Mustafa Kamal, the Minister of Finance; Salman Fazlur Rahman, Advisor to the Prime Minister on Private Industry and Investment; and Prime Minister Sheikh Hasina.

It is this trio who were behind the misuse of the country’s foreign exchange reserve, when the country had such things to spare! The Governor says these practices will no longer continue:

বর্তমানে দেশের বৈদেশিক মুদ্রার রিজার্ভ থেকে নতুন করে আর কোনো ঋণ দেওয়া হবে না। নতুন কোনো তহবিলও গঠন করা হবে না।

Presently, no new loans will be issued from the country’s foreign exchange reserves. Nor will any new fund be created.

He cannot blame the Prime Minister and her advisor and minister. But let’s be absolutely clear whose fault the whole mess is!

And that’s why, when all is said and done, one can’t share the Governor’s optimism:

বাংলাদেশ এখন একেবারে তলানিতে এসে পৌঁছেছে। আর নিচে নামার সুযোগ নেই। এখন ওপরের দিকে উঠতে হবে। ফলে আগামী ডিসেম্বরেই মূল্যস্ফীতির হার কমতে শুরু করবে

Bangladesh has now hit the rock-bottom. There is no scope to fall further. Now is the time to climb up. That’s why inflation will start declining from December.

No Mr Governor, as long as Sheikh Hasina is in power, Bangladesh has not hit the rock-bottom, and there will always be scopes to fall further.

Of course, the Governor likely knows this very well. Perhaps that’s why he also said:

নির্বাচনপরবর্তী যে স্থিতিশীলতা আসবে তা বিনিয়োগকারীদের আস্থা বাড়াবে। তাতে দেশে বিদেশী বিনিয়োগ প্রবাহ বাড়বে। এছাড়া বিভিন্ন আন্তর্জাতিক উৎস থেকেও বাড়তি অর্থায়ন সুবিধা পাওয়া যাবে

Investors’ confidence will be boosted by the post-election stability. This will increase foreign investment in the country. Plus, this will allow additional financing facilities from various international agencies.

There is one sure way to ensure post-election stability —a free and fair election, held under an election-time government, which is only possible if Hasina steps down. Perhaps we can raise one more cheer to him if the Governor was referring to that!