The contradiction between economic policy and practices

What exactly is the political leadership's priority in terms of policy management of this country's economy? How much can declared policy intentions—as evident in published documents—be taken at face value when simultaneous administrative and political steps signal different intentions? The central bank announces a contractionary monetary policy and floats the idea of banking sector reforms. At the same time, we see patently coerced administrative steps of the largest nationalised commercial bank injecting a large amount of liquidity into a much-troubled private bank close to the power centre. The ostensible purpose is to safeguard some financial institutions in crisis, but the proof is in the pudding. Has the short-term promissory note in this particular instance been redeemed on time?

In today's Bangladesh, straightforward economic analyses no longer appear to suffice to understand the policy approach being pursued by the political leadership in the management of the economy. A decoding approach combining the lenses of political economy and political sociology may perhaps provide a more realistic understanding. From such an approach, it seems the actual operation of policy leadership in the management of the economy is being shaped by three components.

The terms vary—cronies, vested groups, politically connected quarters—but the underlying reality is one in which favoured economic actors are given grossly undue benefits flouting rules and even declared policies of the government. These cronies are connected with political powers and are inexorably pushing Bangladesh away from a competitive market economy. Their footprints are everywhere, whether it is in finance, power, transport, infrastructure contracts or even social sector contracts, and so on. For them, the decision-makers seem willing to bend the rules.

Notwithstanding expectations from a "new" government, it does appear that the politico-policy leadership is firmly set on a "business-as-usual" economic and sectoral policy, prioritising the status quo while unwilling to adopt and, more importantly, implement deep-seated urgent reforms. As before, in a business-as-usual scenario, there may also be some new initiatives on the margin.

However, while the dominant policy trend is for the business-as-usual scenario, the policy leadership also appears to be politically sensitive to averting a total breakdown, should the economic crisis show signs of getting totally out of hand. The handling of the foreign exchange reserve crisis last year and the dollar crisis this year underscore what types of red lines are real policy concerns. Last year, in the face of plummeting forex reserves and economic meltdown, drastic measures were indeed taken essentially to impose a near-total freeze on imports and thereby "protect" the dwindling reserves. This year's decision to stop cash incentives for exports has more to do with the lack of dollars than a strong policy stance—though there may be some unintended beneficial outcomes of fostering competitiveness on the margin. Such drastic measures avert prospects of immediate breakdown, but cannot be related to a larger policy shift to address core economic concerns.

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Our banking sector, where no rules apply for vested quarters

I would like to call this brinkmanship policymaking, which means business as usual unless there's an existential crisis—then there would be an action to prevent catastrophic breakdown. In such situations, the leadership overlooks stakeholder protests, like those from importers, accepting consequences like negative economic growth. This prioritisation of immediate crisis management can be perceived as extreme short-termism, lacking a long-term strategy and solely focused on managing immediate crises.

But there is also a third component to take note of. Early indications post-"election" show crony promotion and protection as a firm pillar of "economic policy in operation." The terms vary—cronies, vested groups, politically connected quarters—but the underlying reality is one in which favoured economic actors are given grossly undue benefits flouting rules and even declared policies of the government. These cronies are connected with political powers and are inexorably pushing Bangladesh away from a competitive market economy. Their footprints are everywhere, whether it is in finance, power, transport, infrastructure contracts or even social sector contracts, and so on. For them, the decision-makers seem willing to bend the rules. Unless there is an imminent catastrophic crisis, the business-as-usual approach serves to protect crony interests above all.

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New monetary policy is appropriate in direction, but inadequate in dosage

In the face of deep-seated economic challenges, the policy approach so far appears firmly set on maintaining business as usual, which supports crony protection on the one hand and brinkmanship policy-making on the other if the economic crisis shows signs of graduating to a total breakdown. The amazing part of this story is that, even in such a dire policy reality, there is no lack of trying by the multitudes of economic actors at macro, meso and micro levels. It is such a tragedy that this indomitable spirit is failing to find the traction in the corridors of power that could propel Bangladesh towards a more inclusive and dynamic economic future.

Hossain Zillur Rahman is an economist and political sociologist, and executive chairman of Power and Participation Research Centre (PPRC).

Views expressed in this article are the author's own.

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