Good governance needs strong political will, not IMF conditions

Bangladesh needs reforms in economic policies to avoid corruption and disparity, while ensuring good governance requires strong political will, not just the conditions of the International Monetary Fund (IMF). The government did not even focus on reforming policies to stop capital flight and improve the tax to GDP ratio. Thus, the government’s fiscal space is being squeezed, say economists.

The economists came up with the comments at a programme titled “IMF’s loan: who consumes, who repay” on Saturday organised by the Forum for Bangladesh Studies, a platform of academics, analysts and researchers. They think the current state of corruption cannot be changed by the IMF’s conditions. For this, the government’s strong political intent is necessary. Though the IMF has been working with Bangladesh and that also for many years but non-performing loans have remained high, it was mentioned.

To them, when energy costs rise, everyone wants to pass on the buck. All the time, the power producers and the Power Division try to transfer all the costs onto others. But the government needs to shoulder some of the burdens. It should be treated like health and education, i.e., subsidies where required.

Reportedly, the default loans in Bangladesh’s banking sector jumped 17 per cent year-on-year to Tk 120,656 crore last year. As a result, the ratio of bad loans rose to 8.16 per cent of the outstanding loans in December compared to 7.93 per cent in the same month of the previous year, showed data from Bangladesh Bank. Since one of the IMF conditions is to raise the tax to GDP ratio, now the government will raise tax and VAT, increasing the suffering of the general people. However, they feel the loan will make it easy for the government to get more loans from other international bodies and increase the tax burden on general people.

Mentionable that on January 30, the IMF approved a $4.7 billion loan programme which would run for 42 months and has as many as 30 conditions falling under three categories: Quantitative performance criteria, structural performance criteria and general commitment. The amount of the loan, they said, is not that big compared to the size of the economy but its conditions may contribute in taking some necessary steps.

When we look at the reforms suggested by the IMF, we must also understand: these reforms should not be just for the loan but the such assurance to come from a government representing the will of the people. But in the emergency situation the country needs outside help.