There is nothing new to say about the dire state of the national economy. The government has taken none of the measures necessary to strengthen it. As a result, trade and commerce, imports and exports, and employment generation are virtually stagnant. Whatever activity remains cannot be described as economic dynamism. For more than a year, the business community has been in deep distress. The government has no money. The economic adviser has stated that nearly Tk 70,000 crore is required to keep the banking sector afloat—an indication that the sector is experiencing the worst liquidity crisis in its history. The government is unable to secure funds from any source. In an attempt to raise revenue, it has resorted to what business leaders call “tax terrorism.”
To curb inflation, interest rates have been raised. At a dialogue organized last Thursday by the Bangladesh Investment Development Authority (BIDA), the voices of struggling businesses were heard loud and clear. Entrepreneurs said loan interest rates have now reached nearly 15 percent—making it impossible to operate businesses under such conditions. Advance income tax has been made mandatory regardless of whether a business makes profit or incurs losses. They described “advance and source tax” as a form of “tax terrorism.”
The situation has become such that businesses are now required to pay taxes even when they suffer losses—sometimes large losses—without any relief. In other words, taxes must be paid even without income. Under such conditions, shutting down operations appears to be the only option for many. With interest rates so high, borrowing to run existing businesses or start new ones has become unthinkable.
Meanwhile, NBR field officers are assigned fixed revenue targets. In trying to achieve these targets, they put constant pressure on local businesses. Even without business activity, taxes must be paid. This creates serious difficulties for both tax officials and entrepreneurs. Such problems do not arise when the economic situation is normal. But now the government is trying to “extract water from dry cloth.” This reflects the government’s extreme failure. It is undeniable that the fascist Sheikh Hasina government left the economy in ruins.
There was hope that the interim government would be able to lift the economy from the depths. But it has not succeeded. Instead of revitalizing the economy, it is struggling even to function. All economic indicators are moving downward. Growth in the export sector—one of the main engines of the economy—has hovered near zero for the past five months. Although remittances are coming in, they alone are not enough to sustain the country. There is now concern about whether remittance inflows will even remain stable, as overseas labor markets shrink and visa restrictions tighten.
Key sectors of the economy—garments, overseas labor, and housing—are in deep crisis. Employment opportunities have shrunk. The housing sector has become virtually stagnant, forcing developers to sit idle. Industries linked to construction—such as rod, cement, bricks, and sand—have sharply reduced production. Farmers are struggling to recover their production costs. On top of this, the government’s “tax terrorism” has further destabilized the economic environment. Corporate firms are cutting staff to reduce costs, resulting in hundreds of thousands of workers losing jobs. There is no new investment. High interest rates and aggressive taxation have left businesses powerless. In such conditions, how are they expected to pay taxes?
The government’s behavior now resembles the old saying, “No ability to give rice, only the strength to deliver blows.” In developing countries like ours, the IMF and World Bank often operate like moneylenders—disbursing loans while exerting control. The government is forced to follow their prescriptions. They dictate policies and monitor the state of the economy. When the economy is stable, their control is limited. But amid the current crisis, the interim government has had no choice but to implement their directives. The burden of these conditions is falling on both businesses and ordinary citizens.
Many countries are now seeking ways to escape the debt traps of the IMF and World Bank, reducing their dependence on such institutions. They aim to become self-reliant to recover economic autonomy. Bangladesh too has no alternative but to adopt such a strategy.
Investors, businesses, donor agencies, and foreign governments are all waiting for an elected government. There is widespread consensus that the economic paralysis will not ease without an elected leadership. Donor agencies have already stated they will not engage normally without an elected government. Developed countries also want to resume full bilateral cooperation only after an elected administration is in place. Whoever wins the election, they will work with that government. No one wants to deal with an uncertain regime.
