Main Villain of Economy Financial Sector Weakness: Debapriya Bhattacharya

Debapriya Bhattacharya, special fellow of private research institute Center for Policy Dialogue (CPD), said, “The main villain of the economy is the weakness of the financial sector. The reason for this is the lack of reforms that have been accumulating for a long time. Its effects are now visible. We are unable to move forward due to the carelessness of the financial sector.’

Debapriya Bhattacharya said these things in a conversation with journalists about the macroeconomic crisis on Thursday. This conversation takes place online. The title of the discussion was ‘Draft a Transitional Policy Agreement to Address Current Economic Challenges’.

Debapriya Bhattacharya also said that the current crisis is only a symptom of the disease. The disease is different. That is because of the lack of reform. He said that the government has to reduce the subsidy to deal with the crisis in the financial sector. But now it was more necessary to give subsidies to protect poor people to control inflation.

Debapriya Bhattacharya feels that an interim economic policy consensus is needed for two to three years to deal with this financial sector crisis. Policy issues should be prioritized in this policy compromise. They are to keep the macro economy stable; Sustaining production and employment and protecting the poor. This policy formulation should be based on consensus. So if there is political tension in the future, it will still be possible to protect the financial sector.

Debapriya Bhattacharya advised to protect the working class in the current crisis and said that now is the time to form a National Wage Commission. Garment workers should now be paid dearness allowance. Garment industry owners are getting the benefit of higher exchange rate. So a part of it should be available to garment workers. Because, due to increase in exchange rate, the working class is suffering.

Policymakers are begrudgingly admitting that the economy is going downhill—comments Debapriya Bhattacharya. He said the policy makers are speaking immaturely and in isolation. They are talking misleading words. Some say inflation will be fixed within two months, some say it will not be fixed before 2024. Some say they will not take a loan from the IMF, some say they will. Listening to these talks, it seems that there are no politicians in the policy formulation, bureaucratic policy formulation is being done.

Debapriya Bhattacharya replied to the question whether the price of fuel oil has been increased as a precondition for receiving IMF loan, said that if someone says, the price of fuel oil has been increased on the terms of IMF. This means, the country has lost policy sovereignty. It is not honorable for any government. However, some pre-steps are taken in getting such loans. During this time he gave examples of some steps taken in getting World Bank budget support. He termed the fuel price hike as ‘unintended and ill-advised’. According to him, if tax-GDP was 15 percent, then the government could have given the subsidy now.