Curb loans for luxuries | The Daily Star
12:00 AM, October 23, 2008 / LAST MODIFIED: 12:00 AM, October 23, 2008

Curb loans for luxuries

ERF meeting rings alert on global crunch fallout

Economist Wahiduddin Mahmud has suggested that credit for luxury items should not go unabated, urging people to take a lesson from the recent US credit crunch.
“Borrowing is necessary for business, but loans cannot be used for luxury items. The habit of credit financing to luxury items should be checked in our country even through making rules,” he told a discussion in Dhaka yesterday.
The Economic Reporters Forum (ERF) organised the discussion on 'Global Financial Crisis: Impact on Bangladesh' at the National Press Club.
The former adviser said a transparent and accurate disclosure of bad loans in the balance sheets of financial institutions should be made compulsory.
Wahiduddin also advised people not to follow American's 'casino economy', which means investment of earnings in stocks, bonds, or derivatives that might not create jobs or products but pay a good rate of interest.
Wahiduddin, however, sees no possible impact of the global financial turmoil on Bangladesh's banking or financial sector and stock market, as these are less allied with the global markets. “But, we can take a lesson from global financial crisis."
He predicted that the local trade might face difficulties due to the meltdown in major economies.
The former finance adviser said the country's main export-earner RMG sector might not face any negative impact, but he cautioned: “We have to think now how the sector could be survived with what sort of assistance if it faces any crisis in future due to the financial turmoil.”
On re-capitalisation moves by the governments of some western countries for their financial institutions, he said such re-capitalisation was also practiced here on many occasions, terming it 'an unfair system.'
However the capital injection does not mean “the capitalism is returning back to socialism.”
Wahiduddin also pointed out that following the global crisis people now deliberate on the necessity of a new global financial structure and a debate on 'market economy and governments' role' also revives.
Bangladesh Krishi Bank Chairman Khandoker Ibrahim Khaled suggested adopting a 'wait-and-see' policy for following 'watch' policy. “We don't need to take any hurried decision in the backdrop of global financial crisis,” said Khaled, also a former deputy governor of the central bank.
He foresees some opportunities such as cut in inflation rate and increase in remittances.
He, however, said an impact in the prices of export items is likely.
Khaled also expressed his fear that the country's economic growth rate might not exceed 6-6.5 percent on the financial meltdown.
When there will be no state of emergency and an elected political government assumes power, the black money that has been invested outside the country will return home, he said. “In that case, the growth rate may be even 7 percent as projected by the government,” the Krishi Bank chief added.
Mustafizur Rahman, executive director of the Centre for Policy Dialogue, said there are three probable fallouts from the global crisis; firstly, it may prolong five to six months, slow down the economy and make a quick recover, secondly, it may continue from one year to two years, slow down the economy and thirdly, it may prolong three to four years, slow down the economy sharply and spread to other sectors also.
“If the fallout scenario belongs in between the second and third stages, it will be a concern for us, as it will knock an effect on us” he threw a note of warning.
Agrani Bank Managing Director Syed Abu Naser Bakhtiar Ahmed observed no problem in the short-term. “But, we have to think a lot of things about any impacts in the long-term,” he said.
He also said due diligence is needed before granting any loans.
Anwar-Ul-Alam Chowdhury Parvez, president of the Bangladesh Garment Manufacturers and Exporters Association, however, said if 9/11 can put a negative impact on the country's RMG export, why not this time's financial turmoil?
The US imports of knit products from all over the world in the month of August fell 7.22 percent, while woven imports declined 8.94 percent. “On the other hand, our woven export in August dropped 11 percent, although the knit export slightly up 0.4 percent. It means the global financial crisis is affecting us,” he said.
Ananya Raihan, executive director of Development Research Network, presented a keynote paper at the discussion.
Dhaka Stock Exchange Chief Executive Officer Salahuddin Ahmed Khan, ERF President Nazmul Ahsan and General Secretary Sajjad Alam Khan Tapu also spoke at the function.

Stay updated on the go with The Daily Star News App. Click here to download it for your device.

fifa world cup

Grameenphone and Robi:
Type START <space> BR and send SMS it to 2222

Banglalink:
Type START <space> BR and send SMS it to 2225

Leave your comments

Top News

Top News

Top