Private banks are underperforming, while currency swap will not be profitable for Bangladesh, says Planning Minister MA Mannan
Bangladesh has been among the top 10 fastest-growing nations in the past decade, but amid the current global economic situation, Bangladesh needs a strong reform agenda to sustain its growth trajectory, said a World Bank report.
According to the global lender’s report launched on Thursday, although the financial sector improved in the last four decades, it is still not sufficient.
On the other hand, urbanization is essential for Bangladesh’s next development stage. Attention should be paid to balanced urbanization.
All these findings and indicators were discussed during the launching of the report titled “Bangladesh Country Economic Memorandum – Change of Fabrics.”
In her opening remarks, Dandan Chen, World Bank’s acting country director for Bangladesh and Bhutan, said: “One of the poorest countries at independence in 1971, Bangladesh has become a lower middle-income country today.”
The World Bank has made some recommendations to sustain economic growth. For example, to maintain growth in exports, products should be diversified.
Apart from this, Bangladesh’s tariff rate is higher than other countries, due to which the trade capacity is decreasing, she also said.
Regarding the banking sector, the World Bank said it will play an important role in future economic development.
Agreeing with the World Bank’s report on the banking sector of Bangladesh, Planning Minister MA Mannan said: “Yes, we also have some problems in the banking sector. Our private banks are not doing as well as expected. Besides, we are aware of the necessity to diversify our exports and we have started the reform plan for this sector.”
Regarding discussion about currency swaps, he said: “I think currency swap will not be profitable for us.”
“The World Bank has been working as our development partner for a long time. However, I will take this report and read it seriously,” Minister Mannan added.
Zahid Hussain, lead economist consultant for World Bank Bangladesh, and Nora Dihel, senior economist at World Bank, presented the keynote presentation on the outcome of the report.
In his presentation Hussain said: “One thing I can tell you from history books is that you cannot take persistence for granted. This cannot continue forever. Very few countries in the last 100 years can manage to be in the top 10 list of the fastest-growing countries. Bangladesh entered the fastest growing country in 2010 and we have no reason to take this for granted.”
Asked what growth rate was needed to be an upper middle-income country by 2031 and a higher-income country by 2041, he said that the arithmetic inferred that the baseline growth is 6.5% but Bangladesh’s GDP needs to grow at 7.8% per year to make it to the upper middle-income country by 2031.
If it grows less than that by 6.7% then it takes two years longer, he also said.
The senior economist went on to explain that actual growth consisted of persistence, policy innovation, and residual.
Policy innovations laid the foundations of growth during 1990 to 2004.
The innovations included fast improvements in infrastructure, financial sector, trade orientation, and macroeconomic stability.
Some unusual features such as increased persistence (2000-19) and sudden acceleration (2015-19) need deeper scrutiny, Hussain also said.
Regarding the top 10 fastest growing economies by decade, Hussain’s presentation showed that all top performers experienced boom periods lasting 1-2 decades.
Nora Dihel in her presentation warned about the LDC graduation challenges and why reform is necessary for Bangladesh’s export diversification.
Bangladesh’s exports are extremely concentrated. Actually, the export basket is four times more concentrated than the average developing country. The current basket is heavily relaying in readymade garments. More than 80% of export income comes from this sector. In terms of LDC graduation, this will create further challenges, she also said.
Yutaka Yoshini, lead country economist for Bangladesh and Bhutan, World Bank, moderated the program and Hoon S Soh, practice manager, macroeconomics, trade, investment and public sector for South Asia at World Bank, delivered the closing remarks.
Prof Selim Raihan, executive director at Sanem, Sonia Bashir Kabir, founder of SBK Tech Ventures and SBK Foundation, were also present as discussants.
Agreeing with the World Bank’s report on the banking sector of Bangladesh, Planning Minister MA Mannan said: “Yes, we also have some problems in the banking sector. Our private banks are not doing as well as expected. Besides, we are aware of the necessity to diversify our exports and we have started the reform plan for this sector.”
Regarding discussion about currency swaps, he said: “I think currency swap will not be profitable for us.”
“The World Bank has been working as our development partner for a long time. However, I will take this report and read it seriously,” Minister Mannan added.
Zahid Hussain, lead economist consultant for World Bank Bangladesh, and Nora Dihel, senior economist at World Bank, presented the keynote presentation on the outcome of the report.
In his presentation Hussain said: “One thing I can tell you from history books is that you cannot take persistence for granted. This cannot continue forever. Very few countries in the last 100 years can manage to be in the top 10 list of the fastest-growing countries. Bangladesh entered the fastest growing country in 2010 and we have no reason to take this for granted.”
Asked what growth rate was needed to be an upper middle-income country by 2031 and a higher-income country by 2041, he said that the arithmetic inferred that the baseline growth is 6.5% but Bangladesh’s GDP needs to grow at 7.8% per year to make it to the upper middle-income country by 2031.
If it grows less than that by 6.7% then it takes two years longer, he also said.
The senior economist went on to explain that actual growth consisted of persistence, policy innovation, and residual.
Policy innovations laid the foundations of growth during 1990 to 2004.
The innovations included fast improvements in infrastructure, financial sector, trade orientation, and macroeconomic stability.
Some unusual features such as increased persistence (2000-19) and sudden acceleration (2015-19) need deeper scrutiny, Hussain also said.
Regarding the top 10 fastest growing economies by decade, Hussain’s presentation showed that all top performers experienced boom periods lasting 1-2 decades.
Nora Dihel in her presentation warned about the LDC graduation challenges and why reform is necessary for Bangladesh’s export diversification.
Bangladesh’s exports are extremely concentrated. Actually, the export basket is four times more concentrated than the average developing country. The current basket is heavily relaying in readymade garments. More than 80% of export income comes from this sector. In terms of LDC graduation, this will create further challenges, she also said.
Yutaka Yoshini, lead country economist for Bangladesh and Bhutan, World Bank, moderated the program and Hoon S Soh, practice manager, macroeconomics, trade, investment and public sector for South Asia at World Bank, delivered the closing remarks.
Prof Selim Raihan, executive director at Sanem, Sonia Bashir Kabir, founder of SBK Tech Ventures and SBK Foundation, were also present as discussants.
