Weak banking sector undermines economic recovery: CPD

Inherent weaknesses in the banking sector are undermining the government’s efforts to trigger economic recovery through bank-dependent stimulus packages, according to the Centre for Policy Dialogue (CPD), a civil society think-tank.

The CPD came up with the observation in its analysis on the state of the Bangladesh economy in FY 2020-21. The think-tank disclosed it at a virtual press briefing on Monday. The CPD carries out an interim review of the national economy towards the end of every fiscal year.

“Attempts to trigger private sector investment through subsidies, incentives and working capital support are not being able to compensate for the inherent challenges that continue to undermine the competitiveness of the private enterprises,” it said in a statement.

The CPD said reaching the marginal groups and those who are left behind are proving to be difficult in the absence of effective local-level institutions and access to real-time data. Generating domestic resources to underwrite the needed resources have been weakened in the absence of the much-needed fiscal reforms, said the think-tank.

The net outcome of the above has been that private sector investment remains below the targets set out in the budget.

The CPD also said revenue generation figures remain way below the targets, and redistributive functions of fiscal policies cannot be excluded because of the enforcement capacities and failure to implement long-awaited fiscal reforms.

More to follow..