4 YEARS OF GOVT
High-profile scams mar gains on economic frontShakhawat Hossain
A series of high profile scams, including the biggest fund embezzlement by little-known Hallmark Group have overshadowed the country’s ‘mixed performance’ on the economic front last year.
Economists said rate of inflation, currency exchange rates and the foreign exchange reserves remained somewhat manageable in 2012 compared to the situation in the previous three years.
The major economic indicators were better after a period of hiccup because of double digit inflation, falling foreign currency reserves and devaluation of Taka by around 15 per cent against the US Dollar in 2011.
The foreign exchange reserve is now hovering over $12 billion while Taka became stronger despite the plummeting foreign direct investment and higher spending for fuel oils to feed controversial rental power plants.
The inflow of remittance is poised to reach a new height at $14 billion in 2012, the penultimate year of the ruling party’s current five-year tenure that was also marked by the World Bank’s.allegation of corruption in the Padma Bridge project.
The government was forced to discard Syed Abul Hossain as the communications ministry first and then from the cabinet in connection with the alleged Padma Bridge graft. Another minister Suranjit Sengupta was removed from the railway ministry over a bribery scandal.
Economists said the exports kept maintaining a
positive growth amid global financial downturn.
A steep rise in imports was checked mainly by less pressure for import of rice as there was a good harvest enabling the government to reach the targets for production of boro and aman although it hardly benefited the farmers because of lower-than-expected prices.
‘But all good performances on the economic front were overshadowed by high-profile financial scams,’ said Bangladesh Institute of Development Studies executive director MK Mujeri.
Before the adverse impacts of the share market collapse was over, the Destiny Group scandal hit the financial sector in the early 2012.
The controversial multi-level marketing company and its subsidiaries laundered Tk 3,799 crore through illegal banking because of lapses in regulation by the public bodies.
The embezzlement of Tk 3,600 crore by little-known Hallmark Group from the state-owned Sonali Bank that was detected in August shocked the banking sector.
In the absence of convincing moves by the government for recovering the embezzled fund, Sonali Bank is now facing severe liquidity crisis. It became the largest client on the call money market from its previous position of the largest provider. The bank could not even take part in a syndicated loan offered to Bangladesh Biman due to fund crunch.
Moreover, the Anti-Corruption Commission spotted alleged embezzlement of Tk 3,500 crore from state-owned Bangladesh Small Industries and Commerce Bank Limited.
MK Mujeri, also the former chief economist of the Bangladesh Bank, said it would take many years to heal the wounds the banking sector suffered in the last year.
Former Bangladesh Bank governor Saleh Uddin Ahmed said the Hallmark loan embezzlement was most notorious scam in recent times which drew huge public criticism.
He pointed out that ‘corrupt’ and ‘inefficient directors appointed by the government on political consideration were largely to blame for the loan scams in different state-owned banks.
The government did not take any action against the controversial directors which would encourage such loan scams in future, he said.
The government was forced to reconstitute boards of directors of the state-owned banks on December 20 in wake of the loan scams. As many as 31 directors were appointed, but the selection could not satisfy baking sector experts.
Murshid Kuli Khan, the immediate past deputy governor of the BB, observed that the government should have been a little more cautious about the selection of directors.
Transparency International Bangladesh executive director Iftekharuzzaman noted that everybody had expected that the government would select professional people having good experience in banking to amend its previous mistakes.
‘But it failed to do so because of its lack of commitment,’ he said.
The government also drew public criticism for its controversial policy allowing quick rental power plants to tackle the nagging power outages.
The power situation was complicated by the government’s bias towards electricity generation by the rental power plants without making much progress in implementing low-cost big power plants.
Available data of the power division revealed that quick rental power plants ate up more than 80 per cent of the subsidy for the power sector although they provided around 10 percent electricity to the national grid.
PDB is forced to purchase power from 17 small power plants, mainly fired by diesel, at rates ranging between Tk 10 and Tk 22 per unit. The ministry of finance assessed that power subsidy might reach Tk 9,000 crore in the current fiscal year which would end in June 2013.
Influential people of the ruling party who set up the plants mostly benefited from the subsidy although it became a burden on the ministry of finance, said economist Anu Muhamamd.
Even the IMF expressed concern over the government’s dependence on rental power plants for generating costly electricity.
Besides, a joint study by the state-owned Bangladesh Institute of Development Studies and Geneva-based International Institute for Sustainable Development revealed that energy subsidies accounted for about 4.0 per cent of the country’s gross domestic product, higher than the public expenditure on health and social welfare.
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Date:Tuesday, 1st January, 2013