Prof Wahiduddin slates govt for taking loans to tackle liquidity crisis

Economist Prof Wahiduddin Mahmud yesterday criticised the government's decision to take loans from International Monetary Fund (IMF) and a foreign bank to tackle liquidity crisis.
He observed, “It cannot be a permanent solution. If they [government] take loans from external sources today to pay for fuel and rice imports, what will they do to solve those problems next year ?”
Mahmud, chairman of the Institute of Microfinance, was speaking at a seminar in the city on 'Food Crisis in Bangladesh: Present and Future Challenges'.
The government on Monday decided to take $300 million in hard loan from Standard Chartered Bank and $220 million in soft loan from IMF to ease the pressure that rising cost of fuel and food imports has put on balance of payment.
A former adviser to caretaker government, Mahmud said, “If the government continues its trend of giving large subsidies it would have to obtain more loans.”
He said spending a huge amount in subsidies would obviously affect the other priorities like ensuring loans to private sector at lower interest rates, and strengthening social safety net and poverty alleviation.
Mahmud chaired the discussion organised by Institute of Microfinance, an institute dedicated to research in microfinance, poverty and rural development.
“We have to assess properly the benefits and abuses of giving subsidy,” he observed.
For instance, he said, the government has to police marketing and distribution of fertiliser since the price came down because of heavy subsidies. But the ultimate result is no fertiliser is left in the market.
Turning to foods, he said lately there have been speculations aplenty on food situation, but the food policy should not be determined on the basis of unauthentic information.
He went on, “According to Bangladesh Bank statistics, we have surplus in rice grains, but in reality we are now importing rice to cover production shortfall.”
Mahabub Hossain, executive director of Brac, delivered the keynote speech. He said the price of rice might mark a slight fall after the Boro harvest, but the possibility of purchasing rice from international market at lower cost is little.
“It is the beginning of the end of availability of low priced food in world market. The alternative for the government is to invest more in research and modernisation of cultivation methods,” he added.
Professor MA Baqui Khalily, executive director of the Institute of Microfinance, also spoke on the occasion.