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Muhith seeks advice to reduce non-performing loans

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Staff Reporter
Recognizing “really bad performance” in efforts to reduce the number and rate of non-performing loans in the country, Finance Minister AMA Muhith on Wednesday sought advice from the economists and others on how to address the issue.
“I would seek advice from you on how to address the issue of non-performing loans. We know many loans are given which should not be given,” he said while speaking at the mid-term review of the 6th Five-Year Plan held at the NEC conference room in city's Sher-e-Bangla Nagar.
Chaired by Planning Minister AHM Mustafa Kamal, State Minister for Finance and Planning MA Mannan and Bangladesh Bank Governor Dr Atiur Rahman also spoke on the occasion.
General Economics Division (GED) member of the Planning Commission Prof Dr Shamsul Alam made the keynote presentation.
The Finance Minister said that to address the matter of non-performing loans, the appraisal procedure would have to be strengthened while more emphasis and greater discipline is necessary in feasibility study for projects before sanctioning loans.
He, however, noted that the loan default culture has dropped significantly in the country as it now stands at 11 percent as against 38-40 percent in 1983.
Meanwhile, Bangladesh Bank Governor Dr Atiur Rahman said they are not in a very comfortable situation regarding the non-performing loans as there has been a quantum jump of 2 percent last year regarding non-performing loans due to the country's entry in global practice apart from political instability last year.
He, however, claimed that they have improved a lot on banking supervision and it would be strengthened further as there was no such incident after the Hall-Mark Group scam.
Dr Atiur said: “On the whole, there is no such doubt now regarding stability of the banking sector.”
The Finance Minister said that the government had been very successful in the last five years in terms of revenue ratio to GDP as it has gone up by three percent during this period.
He said that from 1983-2009, the revenue ratio to GDP witnessed a growth of only 3 percent to around 10.5 percent and it shot up to 13.5 percent in the last five years.
“Now our target in the next five years is to raise it further by 4 percent to GDP. Only then we’ll be in a reasonable and comparable level with other countries, and the current success is a big achievement,”
Muhith said that earlier the country's public expenditure and revenue collection was the lowest in Asia and perhaps the lowest in the world.
Regarding poverty alleviation, he opined that the country would be able to alleviate poverty well before the targeted 2030 as its performance in this regard is fantastic.
“There are many countries where poverty has decreased, but inequality has increased. But, Bangladesh is the only country where inequality has declined alongside the rate of poverty,” he added.
In this regard, the Finance Minister stressed the need for enhancing the allocation in social protection, which has a great contribution in removing inequality.
About Public Service reforms, he said the government has not been able to do something special on the issue and it would take more time. “We’re expecting the report of the Pay and Service Commission by this December and after that there could be more initiatives on this.”
About diversification of export markets, Muhith said that the country's exporters are doing well to this end and there is a need to give more encouragement to them.
Putting more emphasis on boosting exports of leather, agro-processed and frozen food items, he hoped that RMG exports would touch US$ 50 billion in the years to come.
About institutional reforms, the Finance Minister said it has not kept pace with other reforms and changes, and this area needs more attention.
Noting that the size of the government has increased a lot in the last 30 years, he said they are going to set up a new body to look into the terms of entitlement of various ministries and institutions and it would be commissioned likely after the next visit of Prime Minister Sheikh Hasina abroad.