Heroic Struggle For Economic Recovery of Bangladesh: Dr. Atiur Rahman

In Search of Sustainable Finance for Green Recovery

Exclusive Interview With Prof. Dr. Atiur Rahman

The whole world, including Bangladesh, is going through the unprecedented struggle against pandemic induced the greatest recession of our time. Both lives and livelihoods are at stake. Yet, countries and people are fighting back courageously. In this context, we asked a few questions to eminent economists and the former Governor of Bangladesh Bank, Prof. Dr. Atiur Rahman, regarding the pace of Bangladesh’s economic recovery.

The InCAP: The world economy is in a deep recession due to COVID-19. In such a situation, how do you analyze the economic status of Bangladesh?

Dr. Atiur Rahman: Bangladesh is indeed a contrarian in this struggle for global economic recovery. The recent IMF World Economic Outlook put Bangladesh as the best performer in South Asia and fourth in Asia. It is rated as the sixth fastest-growing country in the world. 

Many observers were puzzled when they looked at this outlook as Bangladesh is going to surpass India in per capita GDP index, which was 40 percent lower than its giant neighbor just five years ago. This fast catching up by Bangladesh with its neighbor is not a fluke. It reflects a long journey that Bangladesh has been undertaking right from its inception, cashing its indomitable fighting spirit. Its early investment in social development, including education and health plus nutrition, paid it well. While the life expectancy of an average Bangladeshi was at least two years less than an Indian in 1972, the figure has gone up by at least two years more than its average neighbor by now. The infant mortality, maternal mortality, hunger index, fertility rate, immunization level, access to housing, sanitation, schooling, primary health, nutrition, mobile financial services, and a host of other indicators are all better off.

All these social indicators must have roots in the economic performance of the country. And thus, the IMF projection is only a confirmation of this reality. We have been pursuing a dream of realizing ‘Sonar Bangla’, the golden Bengal. I am happy to see that Bangladesh is on the track of that dream project even during this pandemic. The ADB projection is even more optimistic. The stunning macro-economic stability provided by the lower fiscal deficit, external debt-GDP ratio, robust balance of payment, and stable foreign exchange rate with growing foreign exchange reserve gives enough room for moving courageously with huge liquidity injection, and public borrowing during this COVID-19 situation tells a lot about the inherent strength of Bangladesh economy.

The fantastic performance of agriculture, exports, and remittances are the pillars of this unusual growth story of Bangladesh. Our achievement in providing electricity to all is yet another milestone in our economic development. There are many other areas of our success. The success story of Bangladesh is yet to be told. Only small portions of this ‘another’ Bangladesh have started revealing of late.

What do you think the biggest challenge in Bangladesh’s economy in recent time?

Dr. Atiur Rahman: The mobilization of domestic resources with an awful Revenue-GDP ratio has been our biggest challenge. The infrastructure deficit is still persistent even though we have taken a number of steps in initiating mega projects. Despite solid gains in primary health indices, we were caught from behind during the first wave of COVID-19 as our tertiary health system was not at all prepared to take this hit.

Things have improved, but we are still not sure how we will perform if the second wave of infections comes in. The sudden spike in urban poverty and loss of income of those involved in the informal sector during the lockdown proved devastating for many. The government’s decision to open the businesses despite health risks proved to be very strategic in this difficult period. The poor social safety net for the urban sector remains a big headache. Most of the urban poor are, in fact, climate change refugees, and change addressing climate change-related issues remains a significant challenge for Bangladesh as it is a frontier country.

How optimistic are you regarding the economic progress of Bangladesh?

Dr. Atiur Rahman: The recently released ‘World Economic Outlook’ by the IMF predicting Bangladesh to be the fastest-growing economy in South Asia with a likely GDP growth rate of four percent as against nearly 10.5% contraction of the Indian economy has been a talk of the town in recent days.

Moreover, it has been projected to be fourth in the whole of Asia and sixth in the global growth rate in 2020, defying all odds of the ongoing economic recession induced by the COVID-19 crisis, which is thought to be the steepest in living memory. So far, so good. What has, however, startled the keen economic observers of the sub-region that the per capita GDP of Bangladesh may overtake that of India, which was at least 40% higher just five years back. Given the size of the economy, which is now three hundred billion USD plus (mind it was only 8 billion USD in 1972), unlike smaller economies like the Maldives and Sri Lanka, this may have created some ripples in the policy landscapes in South Asia.

While I am not so surprised by this projection itself, which comes from the most conservative of all the development partners of ours, I feel a little perturbed by the kind of reactions that have been reported in the media on both sides of the border. This was inevitable if you look at the long trail of Bangladesh’s development journey right from its inception. Around this time, Bangladesh was dumped as a ‘basket case’ or ‘test case of development’ by the international commenters. Despite the demonstrated capacity of rising from nothing to its present level utilizing the indomitable ‘fighting spirit’ of the hardworking and entrepreneurial people of Bangladesh, the observers tend to miss the point when they hover around the latest milestone.

How would you explain this progression process?

Dr. Atiur Rahman: Bangladesh’s story is still unfolding. It is yet to be told. It is a story of old flames and long dreams. This is a dream of 50 years and a flame of 75 years. The country will celebrate its golden jubilee next were when we would celebrate our success story of rising to today’s prosperity from yesterday’s ashes. At the same time, we are also celebrating now the birth centenary of our Father of the Nation, who started dreaming of a prosperous ‘Golden Bengal’ more than 75 years ago when he was still a student leader.

The focus should, therefore, be on the horizon, not on a single year. Our dream is a marathon, not a sprint. The recent performances, including those during the difficult days of the coronavirus, show the durable and consistent nature of our growth story, a bottom-up growth story, indeed.

Therefore, we should look outside at the horizon and to the world for our ambitions but look inside for confidence and introspection—nothing to be complacent about it. We need to look back to our difficult starting point of this marathon when more than eighty percent of the people were categorized as poor who were just surviving with acute hunger. The fertility rate was about six per eligible couple, which has by now come down to about two, i.e., the replacement rate, thanks to the early investment in primary health and education plus nutrition both by the government other non-governmental actors. Consequently, life expectancy has gone up to nearly 73 years, which was below fifty years just fifty years ago.

Development partners are our partners, and we have been working together for many years to reach here. But we don’t need to look at them for validation. The divergent growth projections – from 1.6 percent by WB and 6+ percent of ADB with IMF staying in between – show the challenge of forecasting. Surely, one lesson is clear: despite these divergences, Bangladesh stands tall on a comparative cross-country basis. Let this be a source of inspiration, not complacency. We need to sail even harder and reform faster. In particular, the ongoing onslaught of the COVID-19 crisis has been clearly revealing our faultiness and we got to pull our socks to address those vulnerabilities, particularly the tertiary health sector and those coming from the climate change challenges.

Our focus needs to be on building stronger the base of the pyramid, diversifying and further modernizing our agriculture and economy, and integrating it with the world economy so that we can have an inclusive and green recovery in the post-Covid world. The other two areas of our strength have been export-led manufacturing and remittances from abroad that have been bolstering our external economy with growing foreign exchange reserves and comfortable debt-GDP ratio. In addition, our lower money supply-GDP ratio, thanks to the prudent and cautious pursuit of innovative monetary policy for more than a decade or so, has provided the space for monetization and courage to the policy-makers to go for a number of robust stimulus packages as early as the first week of April this year. While the implementation of those stimulus packages, particularly for those living at the base of the pyramid, ought to gain further speed, it can still be comfortably argued that this was a smart move by the government which helped regain the business sentiment amongst the entrepreneurs, including the small and medium ones. The economic caravan has started moving again based on that business confidence.

What kind of measures should Bangladesh take to keep this trend of development uninterrupted?

Dr. Atiur Rahman: This developmental marathon must continue unabated, and we should remain focused on the dynamic shifts of our economy that are already in motion. We got to continue our policy support for easing the rules and regulations for both the entrepreneurs and the people who take the services. In fact, easing of business and governance services is itself a better stimulus than just pouring in more money. For that matter, we must remain supportive of the changes that are already taking place and may have been accelerating in the changed context. We need to:

  1. Continue investing more in agriculture, which is now cereal plus including horticulture, fisheries, poultry, and livestock.
  2. Change the energy mix in favor of renewables, if possible, by making more public investment in green energies.
  3. Continue to support ICT infrastructures and encourage more related start-ups.
  4. Improve supply chains, both domestic, regional, and global, utilizing better inclusive diplomacy and digitization of customs and tax regulations.
  5. Improve revenue collection mechanisms by enhancing the capacities of human resources and further digitizations so that the tax-GDP ratio demonstrates a visible spike.
  6. Focus on infrastructures as the force-multiplier for growth. The government’s prioritization on mega infrastructures, particularly the Padma bridge, metro-rail, Matarbari energy hub, and special economic zones, will emerge as the game- changers in taking Bangladesh to a higher growth level by attracting more FDI and as well as domestic investment, which we may not have comprehended yet.
  7. Invest more in education, skilling, and reskilling of the human resources to prepare the country for the fourth industrial revolution, which is knocking at our doors.
  8. Keep the macro-economy highly liquid and stable, remaining bold but cautious without becoming extra sensitive about growing fiscal deficit at this stage of recovery.

The leadership certainly matters in taking a country forward despite all hurdles. We are lucky to have a leader who can look far ahead, act swiftly, care for the people, and remain inclusive. Our journey towards further prosperity continues to gain traction and add more milestones under such a passionate and compassionate leadership, which derives strength from Bangabandhu and 1971. Let’s all give our very best in making this turnaround of our economy.

Which three sectors will you prioritize in pushing the economic development of Bangladesh?

Dr. Atiur Rahman: First, of course, the multi-faceted rural economy with cereal, fishing, poultry, livestock, and horticulture. Also, the non-farm sector, which provides more rural income than farm income, should continue to get the required finance and logistics support.

Second, export-led manufacturing, including RMGs, Leather, Jute, and agro-processing products, should continue to get the priority. This sector employs most of our younger labor force, including females.

Third, the remittances must be made further easier to flow without any hassle for the earners who make great strides in difficult circumstances. They must be treated well in the airports and given well-deserved consular plus travel-related services. The better-off remittances providers must be given better options for becoming new investors in Bangladesh under the FDI category.

In addition, they must have priority access to Special Economic Zones so that they can flourish as investors with all the services they need.

What changes should be made in the banking sector in Bangladesh in a new normal condition?

Dr. Atiur Rahman: The central bank and the banking sector have played a highly supportive role during this pandemic. The stimulus packages given by the government and implemented by the banking sector proved so crucial in making recovery so fast and inclusive. The banking sector should really continue to work for many and not for a few.

The vested interest groups have somehow made a regulatory capture and put the sector in great jeopardy with accumulated non-performing assets. The rules and regulations of the banking sector ought to be further eased for the lower portion of the social pyramid who must get more credit and support from the banking sector. The top ones who are mostly manipulating and bending the rules must be dealt with more forcefully to stop making the banks vulnerable with their insider tradings and flights of capital.

Better governance in the banking sector with a stronger role for the genuinely independent directors can be the right recipe for bringing back order in the banking sector. The central bank must be made a truly strong regulatory body without feeling any pressure from any quarter. The continued support for further digitization of the banking sector with adequate safeguards against cyberattacks could take it to a new height. The complimentary support to fintech can as well improve the quality of financial services, as already demonstrated by our early investment in mobile financial services.

You are considered as a leader and mentor. You are the inspiration of thousands of hearts. Please say something to them.

Dr. Atiur Rahman: Stay engaged. Never lose heart. Be entrepreneurs instead of always looking for jobs. Give jobs to others instead. Enhance better digital literacy and work for the digital economy. You are our future. Bangladesh has come a long way. Don’t let it go down. Contribute your part in making Bangladesh more ethical and green. Skill yourselves to run a fast-moving Bangladesh. Hold high the moral values and let women participate in all economic and social activities without fear and favor. They can do their bit without any extra support if the governance and social environments are up to their expectations.

Let us all move in a caravan to fulfill the dream of achieving ‘Sonar Bangla’, which I think is within your reach.

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