Bad debts at financial institutions amount to 2 trillion taka (more than 16 billion dollars). The figure was announced after the departure of the former prime minister. The caretaker government headed by Muhammad Yunus has called for patience because the reform of institutions takes time. Meanwhile, new brands have expressed their intention to move to countries where labor is cheaper.
Dhaka (/Agencies) – The number of bad loans in Bangladesh has never been higher. According to data published by the Central Bank, at the end of June, more than 2 trillion takas, equivalent to 16.8 billion dollars, or 12.6% of the total loans disbursed by banks, were in default in the country’s credit institutions.
They are also called non-performing loans and are financed loans that the borrowers, in this case especially companies, are not in a position to repay. According to specialiststhis situation began to leak out due to pressure from the International Monetary Fund – to guarantee a loan of 4.7 billion dollars -, but it only came to light after the resignation of the former Prime Minister Sheikh Hasina, currently in India, who was forced to resign due to the anti-government protests led by students.
Between March 30 and June 30 this year alone, the bank had a deficit of more than 290 billion taka (almost 2.5 billion dollars). More than 30% of the bad loans were contracted with state banks, and 7.9% with private banks, percentages that the Bangladesh Bank wants to reduce below 10% and 5% by 2026.
Several experts have expressed skepticism about the central bank’s audits and believe that the actual bad loan figures could be significantly higher than reported. Selim RF Hussain, president of the Bangladesh Bankers Association, said that in terms of loan classification or provisioning, the Awami League government did not follow international standards.
Therefore, further increases are likely to occur in the next quarter, from July to September, due to the fall of the government. Many business groups, experts continue, have accessed loans only thanks to their political influence. “This was not benign negligence, but a deliberate theft of the financial system,” commented the New President of the Central BankAhsan Mansur, adding that restructuring the system will take several years and funding from the International Monetary Fund.
Another economic problem has been added to the list of challenges that the new interim government’s chief adviser, Muhammad Yunus, will have to face in the coming weeks, along with the slowdown in global demand, the deterioration of relations with India (from which Bangladesh imports yarn for its textile sector) and the problems caused by climate change, which is causing increasingly serious flooding. It is no coincidence that several members of the new government, in addition to Yunus, come from the world of economics and finance.
In a speech to the nation, the Nobel Peace Prize winner asked his fellow citizens to be patient, although it is not clear for how long: “I ask everyone to be patient,” he said. “One of our goals is to regain the trust of public opinion in public institutions.”
Despite promises of reforms, from the courts to the Election Commission (officials who served on it resigned today), the situation in Dhaka and its surroundings remains tense. In dozens of factories in the textile sector (on which the national economy depends), workers continue to protest to demand better wages. However, some major international brands have already declared their intention to move production for the next season to other countries in the region, especially Vietnam, which offers cheaper labour.
Moreover, the interim government has yet to announce when the next elections will be held. The Bangladesh Nationalist Party (BNP), which has been in opposition for the past 15 years under Sheikh Hasina’s increasingly authoritarian rule, has called for them to be held as soon as possible, knowing that it could win by a wide margin if it takes advantage of the general mood of dissatisfaction.
As time goes by, young people may also become increasingly impatient, he explained. Analyst Michael Kugelmandirector of the Wilson Center’s South Asia Institute. “What if the BNP, which has no formal involvement in the interim government, fails to get elections held soon? Will it make a move? Will it provoke unrest?” he asked. “This could pose new security risks and aggravate political uncertainty and volatility.”
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